China's garment industry will halt its "precipitous" fall in profit within three years, Yu Shongyao, president of China National Garment Industry Corp., vowed late last week.

The industry aims to restore profits to previously high levels, with a large reduction in the number of firms running at a loss, he said. More firms fell into the red last year, with total economic losses reaching nearly US$50 million (220 million yuan).By the same date, the industry will hit its target of exporting $10 billion worth of garments a year, the official said.

Textiles and garments are China's biggest overseas seller. It exported $8.9 billion worth of garments in 1991, official figures show, up 31 percent from the 1990 level.

Yet profits declined 58 percent, Mr. Yu disclosed, though he didn't give actual figures. Products worth 20 billion yuan have piled up in warehouses, he said.

Mr. Yu acknowledged the garment industry is suffering a "vicious economic cycle." It combines declining economic efficiency, runaway production and a more competitive international market.

Garment sales outstripped those of textiles last year for the first time. But quality is becoming a more important issue on the home market as well as abroad, and Chinese mills are mostly outdated and its designers out of touch.

The textile ministry has earmarked more than $1.2 billion for technology improvements this year, much of it intended to dispense with old spindles. The government has ordered 1 million spindles be scrapped this year.

China has nearly 40 million cotton spindles against the 30 million or so most experts agree would be adequate; a quarter of them are deemed obsolete. In addition, about a quarter of the 800,000 working looms are destined for the trash, officials say.

Last fall, Wu Wenying, textile minister, decreed not a single new spindle would be authorized "no matter what the excuse." Several projects approved for expansion of the textile industry overall were canceled at the time.

Over-production has been chronic for some time. Support for slamming on the brakes came in a ministry assessment earlier this month of the Chinese textile

machinery market.

It sees a surplus of 10 million cotton spindles and a "sharp decline" in demand for such machinery. Demand for cotton fabrics "is expected to decrease," the ministry report said.

On the plus side, "shuttle-less looms will have a brisk market, (and) most of them will be imported."

Ms. Wu earlier promised "special favorable policies" for technological renovation and urged the industry to take advantage of "this good opportunity." No details have yet been disclosed.

About 200 so-called industry enterprise groups have been established within the textile sector, according to the ministry. They account for about one fourth of the sector's total output value and one third of its total earnings

from exports.

Enterprise groups combine scores or hundreds of small and large producers of cotton fabric, printers and dyers, garment makers, silk producers and chemical fiber firms. The intention is to boost exports.