DOMESTIC textile exporters suffer close to US$1 billion in lost profits for every 1 percent increase in the value of the yuan, a leading textile industry association said Friday.

The government has often said that one reason it cannot allow the currency to appreciate too quickly is because of the harm it could do to the margin-thin sector, which employs close to 20 million people.

Sun Huaibin, spokesman for the China National Textile and Apparel Council, said that for every percent rise in the yuan against the U.S. dollar, textile firms saw their profits down 7.2 billion yuan (US$930 million).

“The pressure that a strengthening yuan puts on exports and profitability, as well as a worsening export environment resulting from trade disputes, will continue to impact the industry’s performance in 2007,” the council said in a statement distributed at a news conference in Beijing.

The yuan, which was trading at 7.7432 against the U.S. dollar Friday, has strengthened 4.7 percent since the government revalued it by 2.1 percent and decoupled it from a dollar peg in July 2005.

Analysts in February expected the currency to reach 7.40 to the dollar by the end of this year, meaning a further rise of 4 percent by then.

Still, the organization estimated that profits for firms with at least 5 million yuan in sales would grow from about 88 billion yuan in 2006 to over 100 billion yuan this year.

Customs figures show that China exported US$144 billion worth of textiles and apparel products last year, about 25 percent more than in 2005.

Analysts say that logistical advantages and a relatively skilled workforce mean domestic textile makers will remain competitive even as the yuan continues to strengthen.

(SD-Agencies)