The Appreciation Of RMB Accelerates The Prospects Of Export Textile Enterprises

As early as the end of 2007, many investment institutions expected that the RMB exchange rate would appreciate by 8% - 10% in 2008, while in the first two months of 2008, the appreciation rate of RMB was 1.66% and 1.12%. In view of the performance of RMB appreciation in the first two months of 2008, the relevant institutions have adjusted the annual appreciation expectation of 2008 and raised to 10% 12%.

According to 12% estimates, by the end of 2008, the central parity of RMB against the US dollar will be around 6.5220.

In March 2008, the appreciation rate of RMB has reached 1.31% in a single month. As of March 27th, the cumulative appreciation of RMB has reached 15.64% since the reform. The cumulative appreciation in the first three months of 2008 has reached 4.15%, much higher than that in the same period last year.

The author thinks that the accelerated appreciation of RMB will have an impact on the cotton market from two aspects.

1. According to the calculation method of port's pick up price, the appreciation of RMB will objectively reduce the cost of imported cotton.

The higher the price of imported cotton, the higher the cost of imports due to exchange rate appreciation.

Using the 6.5 exchange rate will reduce the import cost by 1000 to 2000 yuan / ton than using the 7.3 exchange rate.

When the import cotton is 74 cents / lb (CIF) at the exchange rate of 7.3, the price of the port is 14227 yuan per ton, while at the exchange rate of 6.5, the price is only 13214 yuan per ton, the cost of imported cotton is reduced by 1014 yuan / ton, and the imported cotton costs by 1594 yuan / tonnes, 1993 yuan per ton respectively when the imported cotton prices are 80 cents a pound and 100 cents a pound.

From the cost of imported cotton, the accelerated appreciation of RMB has reduced the cost of imports.

Because imported cotton needs to be converted into port pick up price. When the price of cotton rises sharply, the exchange rate will have a buffer effect on cotton price. The appreciation of RMB will objectively have a "pressure reducing and stabilizing" effect on the fluctuation of international cotton prices.

But at the same time, we need to notice that since the new policy of sliding tax in 2008 was added to the concept of "quantity taxation", when the exchange rate changed, the critical point of the volume tax also moved. When the exchange rate was 6.5, the critical point from the amount would rise to 70.15 cents / pound from the beginning of the year to 79.53 cents per pound.

If the international cotton price has risen sharply, there will still be policy leaning in the import and export tax of the medium and high grade cotton in comparison with the middle and low grade cotton.

Two, the accelerated appreciation of the renminbi has led to the deterioration of the survival environment of the downstream textile enterprises and the impact of cotton consumption.

Because of the accelerated appreciation of the RMB, textile and garment export enterprises are difficult to grasp the appreciation rate, which may lead to the loss of orders or the increase of foreign exchange cost and the declining efficiency.

In addition, the appreciation also led to the loss of export enterprises, profits were "swallowed" and other issues.

The annual appreciation of the renminbi is relatively small. Textile exporting enterprises can offset the losses caused by part of the appreciation by raising the price of products. Although the efficiency of the enterprises has declined, they can still survive in a meager profit.

According to the monitoring data of the first textile network, the appreciation rate of RMB in 2006 and 2007 was 3.35% and 6.90% respectively, and the export prices of clothing increased by 10.57% and 10.16% respectively, and the export prices of textiles rose by 1.50% and 1.80% respectively.

Because of the different bargaining power, the survival of garment export enterprises is obviously better than that of textile export enterprises.

When the RMB appreciation rate increases and the scope increases, export enterprises can also offset losses by raising prices, but it is difficult to grasp the extent of appreciation, and the bargaining space is limited. Some enterprises can hardly maintain their meager profits.

According to the calculation of China's first textile network, the annual comprehensive price increase of export enterprises to textile and clothing is about 7.18%, of which clothing export price increase is around 10%, and the annual textile price increase is around 2%.

Once the appreciation rate of RMB exceeds the critical point of the comprehensive price increase of textile and clothing, the cost pressure caused by incomplete digestion and appreciation will become increasingly heavy.

Because of the problem of large quantities of textile products that can not be digested and exported to domestic market due to export obstruction, it will aggravate the problem of structural oversupply of domestic textiles. Fierce market competition makes textile prices difficult to upgrade, and inventory is difficult to digest, which will seriously affect cotton consumption.

According to the sample survey, domestic yarn and grey fabric inventory was 23 days and 33 days in February 2008 respectively, reaching the highest point in nearly three years.

The domestic cotton market is still "stable" despite the sharp rise in its peripheral products. The main reason is the lack of demand for "Dongfeng".