RMB Appreciated 14% Against The Euro, And Export Enterprises Responded Two Ways.

In December 2009, the three major rating agencies collectively downgraded the Greek sovereign rating, officially opening the prelude to the European debt crisis. Since then, the euro seems to be like a broken kite, straight down the abyss. What is even more surprising is that the commerce ministry said this month 17, as of May 14th, the yuan appreciated 14.5% against the euro. As China's most important export market, a substantial appreciation of the renminbi against the euro will cause huge cost pressures to exporters.

As the saying goes, take the lead and move the whole body. In the A-share market, there are many companies that depend on the export of EU, and what will the euro's rapid depreciation of A affect? In this regard, the daily economic news reporter launched an investigation.

RMB appreciation against euro 14% in the first year

In May 17th, the Ministry of Commerce expressed concern about the impact of the European debt crisis on China's exports, including the appreciation of the renminbi against the euro. According to Yao Jian, spokesman of the Ministry of Commerce, Europe's overall economy will be dragged down by the Greek debt crisis. The EU's economic growth is expected to be about 1%~1.5% this year. Because the EU is China's largest export market, accounting for 16% of the trade scale, the European debt crisis will have an impact on the export of China as a whole.

Yao Jian also said that as of May 14th, the yuan appreciated by 14.5% against the euro, which would cause huge cost pressures to our exporters and also have an impact on trade policy adjustments. Data show that in the first 4 months of this year, the EU is still the largest trading partner of China, with the total value of bilateral trade between us and China reaching US $137 billion 770 million, an increase of 34.6% over the same period last year.

The central parity of the central bank's RMB exchange rate shows that as of May 20th, the yuan reported 1:8.4291 against the euro, which has appreciated by 14% over the past year. Over the same period, the euro has depreciated by nearly 10% against the dollar in the same period.

According to customs statistics, in the first 4 months of this year, the total value of China's imports and exports was US $855 billion 990 million, of which exports were US $436 billion 50 million, an increase of 29.2%. In the bilateral trade of the main trading partners, the EU is China's largest trading partner in 1~4 months. The total trade volume between China and the EU is 137 billion 770 million US dollars, an increase of 34.6%, of which the export growth is 30.4%. Over the same period, the total trade between China and the United States was 107 billion 180 million US dollars, an increase of 25%. The daily economic news reporter found that in the 25 countries or regions being counted, the EU export growth rate ranked only nineteenth.

The biggest threat will be demand decline.

What will be the impact of the devaluation of the euro against the RMB? The Great Wall securities strategist La Bo told the daily economic news reporter that in theory, as the euro fell sharply against the renminbi, the export companies of the European Union would surely be subject to exchange losses. This year, however, the euro's decline in the renminbi was mainly due to the fact that the renminbi was pegged to the US dollar and the euro depreciated against the US dollar. When the euro is not a one-time devaluation and RMB appreciation slowly, export enterprises have time to effectively reduce exchange risk through hedging, raising export prices or contracts.

In fact, the biggest threat to exporters is not the depreciation of the euro, which will be a reduction in the EU's future demand, he said. In order to deal with the European debt crisis, the EU must reduce the deficit of member countries in the future when it comes to the rescue plan, which is likely to lead to a slowdown in EU economic growth and a decline in import demand in the second half of the year. Even so, Chinese enterprises can still reduce their impact through domestic channels. In addition, because of the depreciation of most Euro currencies this year, the relative competitiveness of exporters has not changed much.

Hedge against loss

The daily economic news reporter found that in order to deal with the impact of exchange rate fluctuations on the company, the export enterprises are different. To sum up, two types of coping styles are adopted.

First, it is probably the most mainstream and effective way to reduce exchange losses by hedging forward Forex sales and remittance. In the wake of this year's European debt crisis, many companies have adopted this approach, including Halliday (002206, closing price of 30.13 yuan), Zhenhua Heavy Industries (600320, closing price of 6.81 yuan).

Statistics show that Haili's main business includes polyester industrial filament, light box cloth, geotextile and so on. Its 2009 annual report shows that the export business revenue is 85 million 224 thousand and 200 US dollars, accounting for nearly 60% of the revenue, while about 17.8% of the export business is settled in euros. To cope with the loss of foreign exchange settlement, the company promptly adjusted the proportion of settlement between the euro and the US dollar, and adopted trade financing and forward selling and foreign exchange to avoid the loss of exchange rate fluctuations. It is interesting that Haley also reduced the financial cost during the period by 74% as a result of a decrease in exchange losses.

In order to deal with the devaluation of the euro exchange rate, the company mainly uses forward hedging, which means that after a certain level of exchange rate, the price will be fixed at a certain level, and the price will be settled again. As the company and overseas customers are factory to factory mode, the specific exchange rate changes in hedging will vary from factory to factory. It is worth noting that, although the EU needs to reduce risks in the second half of the year, European exports in 2009 and 2008 are increasing, thanks to product competitiveness and cost advantages. In addition, due to the mandatory export habits of products such as tyres, industrial hoisting belts and other products in Europe, these products are relatively low in substitution and less affected by economic factors.

Zhenhua heavy industries may be more vulnerable to the depreciation of the euro. The company is a leading enterprise in the port machinery industry, and bulk machinery and container cranes are the two traditional main businesses. Container crane domestic market share and international market share are higher, far ahead of other competitors. According to public information, the proportion of the company's products exported to the European Union accounts for 24.68% of its main business, ranking second in all export areas.

For the impact of the depreciation of the euro on the company, Zhenhua heavy industry director general told reporters that more than 70% of the company's products are exported, and some accessories also need to be purchased from abroad. These international trade spanactions are mostly settled in US dollars and euros. The exchange gains and losses arising from exchange rate changes directly affect the company's profit level. The staff also said that in order to avoid foreign exchange risk, the company has been using foreign exchange hedging spanactions and other financial means. At the same time, the reporter also learned from the public information that Zhenhua heavy industries' foreign exchange hedging spanactions in 2008 brought 732 million yuan profit for the company.

Move two to us dollar settlement

In addition to hedging, GoerTek acoustics (002241, closing price of 29.57 yuan) and Jiangsu's sainty (600287, closing price of 7.46 yuan) and Qingdao Jin Wang (002094, closing price 13.36 yuan) and other three companies also take the initiative to settle foreign exchange in the US dollar to reduce exchange losses; at the same time, if the euro remittance part, customers can make up for enterprises in long-term cooperation.

It is understood that the main business of electro acoustic components GoerTek acoustics in 2009 overseas income of 750 million yuan, accounting for 67% of the main industry revenue. Its overseas customers include Samsung, HP, CISCO and so on, while one of the biggest customers in Europe is NOKIA, a mobile phone giant.

On the impact of the depreciation of the euro, GoerTek acoustics executives believe that the company's overseas business is not simply divided by region, but by customers. As a matter of fact, since the settlement is mainly based on the US dollar and the euro is less than 10%, its performance is less affected by the devaluation of the euro. To be sure, even if the yuan is stronger against the euro, the company can reduce the risk by adjusting the exchange rate of foreign currencies such as the euro and the US dollar. This appreciation can be sustained by enterprises.

Another Jiangsu textile and apparel export company, sainty, though not hedging, is still trying to reduce the impact of the euro diving by adjusting its forward quotations and long-term complements to customers. Statistics show that Jiangsu exported 492 million dollars in 2009, down 24.36% compared to the same period last year. Exports to the EU amounted to US $193 million, accounting for 39% of exports and second leading to 20 percentage points in the US. In addition, the financial cost increased by 55% in 2009, mainly due to the decrease in exchange earnings.

"A substantial appreciation of the renminbi against the euro will definitely have an impact on the company." Jiangsu Shun Tian secretaries official told reporters, "as part of the company's settlement in the US dollar, the devaluation of the euro requires all links of the company to share the pressure. It is worth noting that the quotation quoted by the company is in accordance with the expected exchange rate. If the exchange rate of this single currency exceeds a certain level, the next quotation will be adjusted accordingly. At the same time, if the company and the customer settle in euros, the customer can reduce the company's related losses through other long-term complements, and ultimately achieve the relative balance of trade.

In addition, as the largest handicraft candle manufacturer in Asia and its related products, Qingdao's export business accounted for 67.3% of the main business, while the European Union occupies a very high proportion in its exports. In order to avoid the risk of foreign exchange caused by the depreciation of the euro, the company adjusted most of its export business to us dollar settlement. The US dollar currency fund held by the company increased by 87.91% in 2009 compared with 2008, which brought 1 million 926 thousand and 500 of the exchange earnings in 2009.

According to the company's 2009 annual report, the company will arrange the use of foreign currency and RMB funds rationally according to the changes in supply and demand at home and abroad. Through close cooperation with the settlement bank, it will take export instruments, long-term settlement, adjustment of debt structure and appropriate increase in foreign currency loans to control exchange rate risks.