RMB Exchange Rate Will Slow Down In The Next Fourth Years.

July 21st marks the 3rd anniversary anniversary of the reform of the RMB exchange rate regime.

According to the latest exchange rate of US $1 for 21 days to 6.8271 yuan, the appreciation of RMB against the US dollar has exceeded 21% in 3 years.

Today, fourth years of foreign exchange reform, the pace of RMB appreciation will probably slow down.

Premier Wen Jiabao said last weekend that China will maintain a stable foreign trade policy to help exporters cope with the global downturn.

Some market participants believe that this may mean that the government will adopt a more moderate approach to reduce the impact of RMB appreciation on China's export industry too fast.

Export industry was hurt in the first half year

Since the beginning of 2008, the appreciation of RMB has reached 7%, which is 1.17 times the total appreciation in 2005 and 2006. It is 0.15 percentage points higher than that in 2007.

"Such a rapid appreciation of the renminbi really hurts us."

An export oriented clothing manufacturer in Ningbo told reporters that last year, the gross profit of his clothing factory was more than 50 million yuan. But because of the acceleration of RMB appreciation this year, the gross profit of the whole year is expected to be half that of last year.

The manufacturer has also hired experts to analyze and draw the conclusion that the acceleration of RMB appreciation is the main reason for the decline of profits. The proportion of profit evaporation is as high as 53%, which is far higher than the two factors of "external environment deterioration" and "monetary policy tightening".

Influenced by the accelerated appreciation of the renminbi, many export oriented enterprises in the Yangtze River Delta and the Pearl River Delta have not been struggling on the line of life and death, especially the traditional low value-added industries.

Taking the textile and garment industry as an example, according to the report of the Guangdong foreign trade and Economic Cooperation Department, the profit margin of the cotton textile, wool textile and garment industry will decrease by 2%~6%, and the revaluation of RMB 3% will probably erase the average profit of the textile industry every 1% appreciation.

China's textile and garment exports account for about 20% of the total export commodities, and the impact of RMB appreciation on export trade can be imagined.

Appreciation of the slowdown has become a consensus

Last weekend, Wen Jiabao, premier of the State Council in Guangdong, said that China's foreign trade policy will be basically stable.

The speech prompted speculation that the appreciation of the renminbi is expected to slow down in the fourth years of foreign exchange reform.

Haitong Securities senior macroeconomic analyst Chen Yong told reporters that the foreign trade policy here refers to all policies that affect import and export. The current RMB exchange rate has great influence on import and export, so it must be included in the scope of foreign trade policy.

Therefore, it can be interpreted as a signal to further stabilize the exchange rate and slow down the appreciation of the renminbi.

Zhou Qiliang, a forward trader in Xingye Bank, also expressed the same view. From the most typical 1 year RMB swap, the spread between the original and 5000 basis points has now narrowed to around 2000 basis points.

Such a change in the number of points is enough to show the expected change in the appreciation of the renminbi. In the fourth years when the RMB exchange rate reform has entered the period of revaluation, it has become a consensus.

The short term will still face difficulties

"The slowdown in Renminbi appreciation is an inevitable trend, but for export companies, the improvement is still relatively limited."

In an interview with our reporter, Lu political commissar, chief economist of Industrial Bank, said that only from the perspective of settlement, there may be favorable conditions, especially for those export enterprises which supply raw materials in China, which can reduce the losses caused by the exchange.

But most of the trade is pre agreed. Appreciation has slowed down the volume of business of these large enterprises, so it is difficult for the export enterprises to make a big difference in the current year.

These enterprises can only expect appreciation and deceleration to create positive results in the coming year.

Chen Yong also expressed a similar view. He believes that at present, the trend of appreciation slowdown can stabilize these exporters' expectation of appreciation and keep them through the most difficult period at present. Apart from that, it is difficult to change the current dilemma of export enterprises. After all, the difficulties of these enterprises are not formed in the short term.

"However, with the slow appreciation cycle of RMB reentry, export enterprises can still expect much in the fourth years of remittance."

Chen Yong finally told reporters.