China's export-oriented textile industry is suffering from low profit margins amid yuan appreciation, China National Textile and Apparel Council (CNTAC) said.

According to CNTAC's latest industry survey, profit margins averaged at 3.9 percent among textile companies last year. Two thirds of the companies surveyed reported an average profit margins of 0.62 percent.

The survey, conducted by CNTAC in early March covered textile companies in six provinces including Jiangsu, Zhejiang and Guangdong, which accounted for 85 percent of China's textile exports.

Small and medium-sized companies suffered the most, with some on the brink of break down, said Sun Huaibin, a CNTAC spokesman.

Industry experts said the appreciation of Chinese currency and rising costs in both raw materials and labors have squeezed the profit margins.

Fujian Nanfang Co, a state-controlled textile firm in southeastern Fujian Province reported 9.53 million yuan ($1.36 million) loss in net profit, according to its 2007 annual report released on Wednesday.

According to an estimate by webtextile.com, every rise of one percent in the yuan would cause a 2 to 6 percent drop in textile commodity profit.

The Chinese currency, yuan, has risen about 4 percent against the dollar so far this year, breaking the 7.03 mark against the dollar on Wednesday.

Meanwhile, demand remained lukewarm largely because of weakening US and European demand and the severe winter storms.

Customer statistics showed that China's textile and garment exports in February dropped 32.9 percent from the previous month.