it is bad because towel implies the depature or death of one's beloved. in taiwan, one will send a "奠儀" to a family whose beloved just passed away , and he will get a towel （答紙毛巾 / 喪禮毛巾） in return. it is said that such custom derived from japan. "奠儀" , some money packed in a white envelope, acting as a way of social aid to the unhappy family. 臺灣民間喪禮中為何以毛巾回送親友以表達謝意? 喪家接受親友之弔賻，禮需答之，謂之「答紙」。 於三旬、五旬、七旬或百日、或對年時， 以「糕仔」、「饅頭」、「麵龜」等回贈親友以表謝意。 現在則回贈日用品，而以臉巾肥皂者最為普遍。 台灣現行喪禮，贈送弔客以毛巾、手帕，習以為常， 這完全是日據時代日本人留下來的風俗。 以毛巾答紙，肇始於日據時代，晚近則收禮之同時即以毛巾答之。 另一說法 因為早期之喪葬是親友鄉人來幫助的，送毛巾供他們擦汗。 或是 送毛巾，讓前來弔祭的親友擦淚。 通常為白色， 一長一短， 長者， 於典禮中 披掛於身上 以上為台灣閩客族群共通習俗 ， 台灣排灣族人(paiwan)服喪或參加喪禮，也會配戴喪巾以示哀傷與尊重。

I havent heard that give a towel as a gift is bad. but i saw from website before saying about the meaning of sending a towel as a gift which are all nice meaning. so maybe in some place have this special culture. i dont think its bad to most people in china.

Chinese culture is not unified. It is different from place to place. Chinese people from the southern China prefer No. 8, which means getting easy money. However, oversea Chinese living in philipines, they don't like No. 8, it sounds death. I don't see anything wrong that giving towel to somebody as a gift is bad. We (my wife and I ) had received a towel set as a gift. Anyway, it is not popular in Chinese culture that giving somebody a towel as a gift is bad.

Where did you hear that?