China's 38 major state-owned textile enterprises suffered a first-quarter profit drop of nearly 40 percent, according to a recent report by a State Council commission.
During the first three months of 2005, the sector reported cumulative income of 15.98 billion yuan (US$1.9 billion) in its core businesses, an increase of 0.5 percent. But costs rose 2.7 percent to 13.96 billion yuan.
Even as export volume jumped 20 percent to 2.73 billion yuan, profits were down 38.6 percent, amounting to 290 million yuan.
Given the profit decline, Chinese Trade Minister Bo Xilai urged the European Union not to exaggerate the importance of the textile issue. Meeting on Thursday in Paris with EU Trade Commissioner Peter Mandelson, Bo stressed that limitations on Chinese textiles would harm not only China but also EU importers, retailers and consumers.
Some European nations are expressing concern over a surge in Chinese textile exports, Mandelson said, adding that the EU will take quick action to slow down the momentum.
China has worked to control the increase in textile exports to Europe, Bo said. The export rate began to drop in March and will continue to decrease in the next few months, he said.
Last year, the bilateral trade volume reached US$177.3 billion, with the  European Union surpassing the United States to become China's biggest trading partner.
Bo noted that Sino-EU textile trade represents only 7.1 percent of total bilateral trade. Bo and Mandelson agreed to enhance consultation on the textile issue to find a suitable settlement.