China has set up a special fund using revenues from textile export tariffs to help improve the competitiveness and efficiency of the textile industry.

The 1.36 billion-yuan-fund (170 million U.S. dollars) will be used to boost technical innovations in production, develop new fibers and help make the industry more environmentally friendly and energy efficient, said Zhang Li, an official with the Bureau of Economic Operation under the National Development and Reform Commission.

"The government set up the fund out of concerns that the textile industry faces increasing international trade disputes and urgently needs to change its pattern of growth," said Zhang.

The European Union and the United States have set caps on imports of Chinese textiles, arguing that a surge of Chinese products have disrupted their markets.

Other countries like Ecuador, Peru, Colombia, Brazil and Turkey all launched anti-dumping investigations into Chinese textile exports.

To cope with the frequent trade frictions, the government has been trying to encourage the textile industry to restructure itself, upgrade technologies and develop more products with proprietary intellectual property rights.

Meanwhile, China's textile sector is also strained by high resource consumption and serious pollution, said Zhang.

The official noted that the printing and dyeing of fabrics makes the industry the second largest consumer of water and the sixth largest producer of wastewater of which only 7 percent is recycled.

"Support from the fund is being offered on a one-time only basis, but we are exploring a long-term mechanism," said Zhang.

China's textile exports surged 25.3 percent last year from 2005,accounting for 15 percent of the country's total exports, according to Zhang.