The Chinese government is bailing out the country's largest textile company, China Worldbest Group, to the tune of US$618m - in a move that has caused outrage among US textile producers.

China Chengtong Group, a state-owned assets management company, will invest the funds in Worldbest and take a majority stake in the group which houses textile and pharmaceutical businesses, according to reports from the official Xinhua News Agency.

The funds will be used to help the Shanghai-based conglomerate repay outstanding debts of around CNY25bn (US$3.1bn). The takeover is, however, likely to lead to the break-up of some of Worldbest's assets.

Worldbest, which was set up in 1992, has 60,000 employees and reported assets of CNY57bn ($7 billion US) in 2004. The firm's website lists textile operations in Mexico, Canada, Thailand and Niger, as well as China.

According to the Xinhua report, the deal is the largest ever between two state-owned companies.

However, Cass Johnson, president of the US-based National Council of Textile Organizations, says the move demonstrates that the Chinese government's WTO commitments "aren't worth the paper they were written on."

"This is the most blatant example of the Chinese government's wholesale disregard of free market principles and its WTO commitments," he said in a statement. 

"China agreed as part of its WTO commitments to operate state-owned enterprises 'in accordance with rules of market economy'.
"Textile sectors around the world are competing against China Inc," Johnson continued, "a unique marriage of Chinese government resources with private industry that defies all standards of fair play or free market principles."
Since the removal of quotas, China's exports in apparel categories where safeguards have not been used have risen from a 12% share to 42% of the US market.
Johnson added: "US textile manufacturers along with the rest of the world's producers are paying the price for China's anti-free market actions. 31 US textile plants have closed so far this year and textile and apparel exports by developing and least developed countries have dropped by $5bn."