In a rundown office to the side of a gloomy and deserted breeze-block factory, 76-year-old Yasser Hirbawi is hunched on a low couch turning his life's work over and over between his fingers.

In his lap – and on his head – are specimens of what has become the internationally recognised symbol of the Palestinian national struggle, the kaffiyeh, the chequered headscarf worn by politicians and militants alike and adopted not just by their supporters but by fashionistas across the globe.

But the kaffiyeh's ubiquity is of small comfort to Hirbawi, his two sons and the sole employee left in the last factory making the headscarves in the Palestinian territories. After almost 50 years, the family business is struggling to keep afloat amid a flood of cheap Chinese imports.

"The Chinese kaffiyehs are like a cigarette paper," says Jouda Hirbawi, 44. "They are cheaper, but the quality is lower."

According to the Hirbawis, the Chinese manufacturers use polyester and poor-quality cotton in their kaffiyehs. In contrast, a Hirbawi kaffiyeh is laboriously produced with high-quality material and – just as importantly – a sense of history.

But the Chinese products sell at less than two-thirds the price of the Palestinian scarves. "We sell a dozen for 100 shekels (£17). The Chinese sell a dozen for 60 shekels (£10)," says Jouda. "The people who are importing this garbage from China are killing the local product."

Hirbawi Textiles once employed 15 men in the factory, plus perhaps another 25 women finishing the scarves in their homes, between them supporting about 300 people and producing hundreds of kaffiyehs daily. "We were working 17 or 18 hours a day, supplying the local market. It's very intensive and tedious work."

Now one loyal employee is left working alongside the Hirbawi brothers. All but one of the looms was idle today, its clacking echoing around the factory floor. A low-wattage fluorescent strip casts a pool of light over the machine in the factory gloom.

The change in fortunes followed the signing of the Oslo accords in the early 1990s, after which the newly formed Palestinian Authority opened up its market to imports. In 1995, Hirbawi Textiles closed down. "There was no demand," says Jouda. "We shut for five years. Then we said, 'This is the only thing we know how to do', so we decided to try again."

The family is bitter at the PA's refusal to protect Palestinian businesses and what it describes as a "national product".

"There should be high taxes imposed on outside products," says Yasser Hirbawi. "They should not be helping outside products against local products. A falafel stand makes more money than this factory."

He is dismissive of the Palestinian businessmen importing Chinese kaffiyehs. "They are merchants, they just want to make a profit."

The factory's main source of income now is from foreign visitors, without whom "we would have closed a long time ago," says Jouda. "A lot of foreigners wear kaffiyehs to show their support for the Palestinians."

In the factory office, a small boy is rearranging bagged kaffiyehs on banks of shelves awaiting the next group of foreigners to descend with shekels to spend. On the wall is a poster of Palestinian icon Yasser Arafat, sporting, as always, a kaffiyeh. Is it one from the factory? "Yes," says Yasser Hirbawi. "Maybe," says his son more realistically.

As they show their visitors out, they shut down the one working loom and switch off the overhead light. It's lunchtime and perhaps production is over for the day.

Jouda Hirbawi insists the family will not give up its struggle to keep the factory going. "We will continue. This is the fruit of 50 years of continuous work – it's more than a business. We are trying to be competitive but we want to manufacture a high-quality kaffiyeh."

The family finds it hard to believe that the item they have been producing for almost half a century is in such global demand yet their business is on its knees.

"All over the world the kaffiyeh has become a symbol of resistance – even on protests that have nothing to do with the Palestinian people, you see people wearing them," says Jouda.

His father, weary and bitter, adds: "Everyone all over the world is benefiting from this symbol – except us."