The Pain Of RMB Appreciation: Export Processing Enterprises Will Be Unable To Digest The Cost Because Of Their Inability To Digest The Cost.

A pair of export jeans, which sell for 8 dollars, is being eaten up by a variety of rising costs. Only a few cents can be eaten up. Once the appreciation of RMB exceeds 5%, its "home" - export processing enterprise will be abandoned because of its inability to digest costs.

At a profit margin of 5%, a $8 pair of jeans can be converted to RMB less than 3 yuan.

Since this year, the price of raw materials such as cotton, cotton yarn and other raw materials has been rising, and the price of fabric has risen sharply. The price of elastic denim is rapidly rising from 12.3 yuan per yard in January to 13.7 yuan. A pair of jeans is calculated by 1.5 yards, and the cost of fabric is eaten away from the profit space of two yuan left and right.

After the Spring Festival, the Pearl River Delta region is generally facing a shortage of workers. The wage of garment workers has generally risen by 10%~15% to around 2000 yuan, and the cost of piecework to each piece of clothing has risen by three or four cents.

In addition, buttons, zippers and other accessories are rising.

"If RMB appreciation is 2%, after the share price increases with the customers, the cost of each garment export will increase by about 20 Fen. We can still afford it, but once the appreciation is over 5%, it will be difficult to bear."

Assistant Manager Zhong Hao Sen, general manager of Guangdong textiles import and export Limited by Share Ltd, said in an interview yesterday that there had been a large list of jeans in North America recently. The two sides had been grinding for half a month and had not finalized them at last.

At present, all kinds of production costs are rising. Once the RMB appreciates, the company will not lose profits and will lose money, so it is hesitant to take orders.

Although orders are getting warmer, they are also under pressure of cost. He is very worried that the appreciation of the renminbi will become the last straw to overcome the camel.

Vice Minister of Commerce, Zijin Mountain recently said that any further appreciation of the renminbi could bankrupt exporters, which China could not afford, and "if water was heated to 99 degrees, it would not boil. However, if the market continues to rise 1 degrees, the water will boil", which is a metaphor for the fragile situation faced by Chinese exporters.

This is referring to Zhong Hao Sen's heart. He has been closely monitoring the change of exchange rate recently. He hopes that the exchange rate of the Spring Fair will be as stable as possible in April.

Before the export of clothing, the company maintained a profit of 5%~10%, which was quite good among its peers, but still failed to get rid of the pressure of rising costs.

Gao Yong, vice chairman of the China Textile Industry Association, said in an interview recently that the average net profit margin of the entire textile industry is now at 3%~4%, and will not exceed 5%. If RMB appreciation exceeds 5 points, more than half of the enterprises will die.

If the import quota of cotton in the future is not properly liberalized, then the textile industry may lose a large number of orders after the appreciation of the renminbi, and the average profit will return to zero.

Not only is the textile and garment industry, toys, shoes, bags, electronics and other industries are worried about the appreciation of the renminbi to eat up the meager profits.

The head of a large toy enterprise in Guangdong said that the RMB appreciation was more destructive than the financial crisis. Before the outbreak of the financial crisis in September 2008, a number of export processing enterprises in Guangdong collapsed because they could not bear the cost pressure.

Since the exchange reform in July 2005 to the financial crisis, the cost of the company has increased by 33%, of which the exchange rate cost has increased by 16%, especially since the accelerated appreciation of RMB 11% from October 2007 to July 2008, which almost engulfed the profits of enterprises.

"Although orders are increasing, they are basically cheap sheets, and many toy companies are struggling at the margins of the 2% profit margins.

Under such circumstances, China must resist external pressure on the renminbi and avoid the warning of rapid appreciation in 2008.

The person suggested.

The exporters, who are suffering from rising costs and pressure, said in an interview with our reporter yesterday that the yuan has appreciated by 20% since the reform. They hope that the orders that are warming up will not be troubled by the appreciation of the renminbi again.

Long Guoqiang, Minister of the Ministry of Foreign Economic Research of the State Council Development Research Center, told reporters yesterday that after the financial crisis, China's foreign trade is recovering. The stability of the RMB exchange rate plays a key role in promoting the development of China's foreign trade. Foreign trade is closely related to employment. This is the reason why the Chinese government is showing no compromise at the moment when it faces pressure on the RMB.

Under the current RMB exchange rate, China's import growth rate is far higher than that of exports. For example, adjusting the RMB exchange rate may bring China's balance of payments risk.

Under the current weak external demand and strong domestic demand, China's RMB exchange rate level is not unreasonable.

In addition, long Guoqiang suggested that China's export enterprises should have a competitive advantage by increasing the added value and adjusting the cost of product structure and so on. There is no need to worry too much about the pfer of orders and restrict the bargaining space.