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Exchange Rate Reform Stimulates Spinning Enterprise Nerve &Nbsp; How Far Can High Cotton Price Go?

2010/6/26 15:05:00 39

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Exchange Rate Textile Enterprises Cotton

On the 19 day, a spokesman for the people's Bank of China said that according to the domestic and international economic and financial situation and China's balance of payments situation, the central bank decided to further promote the reform of the RMB exchange rate formation mechanism and enhance RMB exchange rate flexibility.

In fact, the central bank's move has sent a more clear signal: the RMB exchange rate flexibility will be further enhanced compared with the financial crisis period.

There is no doubt that the increase in RMB exchange rate elasticity is bound to increase the uncertainty of the operation of export enterprises, especially labor intensive enterprises.

After the financial crisis, China's textile enterprises have not yet fully recovered, and can withstand the pressure of the appreciation of the renminbi? What kind of impact will the pressure of textile enterprises increase on the upstream enterprises and how far can the high cotton price go?

First, the appreciation of RMB in the second half of this year is not suspense.

RMB withdrawal from pegging to us dollar, increase

Exchange rate flexibility

First of all, the pressure of appreciation.

According to Goldman Sachs analysts, although the Chinese claim to further promote the reform of the RMB exchange rate formation mechanism, "focusing on market supply and demand and reference to a basket of currencies", we believe that the most likely situation is the RMB's resumption of the floating pegging mechanism against the US dollar. We maintain the US dollar / RMB exchange rate forecast for 3 months, 6 months and 12 months, unchanged at 6.74, 6.66 and 6.49 respectively.

Morgan Stanley analyst Wang Qing estimates that the US dollar / RMB exchange rate level will reach 6.20 by the end of 2010. It will reach 6.20 by the end of the year.

Two, the appreciation of RMB will promote the reshuffle of textile enterprises.

Our country

Textile and garment industry

Foreign dependence is high and bargaining power is weak.

Data show that the average net profit of the domestic textile and garment industry is only 3%-5% at present. If the RMB appreciates, it will inevitably squeeze the profits from the textile and garment industry.

If the appreciation of RMB reaches 5%, the textile and garment industry will have to reshuffle.

In fact, if the appreciation rate of RMB is large, it is also estimated that the textile and garment industry will adjust the product mix, adopt new technologies and increase the added value of products, which will lead to polarization within the industry.

The direct impact on upstream is the demand for raw materials instead of rising or falling.

Three, labor costs further squeeze profit margins in the textile and garment industry.

In recent years, there has been a shortage of labor in coastal provinces. In order to retain skilled workers, there has been another wave of pay increases.

Last weekend, the Anhui provincial government decided to raise the minimum wage level in the province from July 1st.

According to statistics, including Anhui, 15 provinces across the country announced this year to raise the minimum wage standard, ranging from 12%-30% to more than 20% of the total.

In fact, the economically developed coastal provinces have long begun to raise wages for employees, with the aim of retaining skilled workers.

This creates a contradiction, one side is the profit margin that the enterprise is constantly squeezed, and the other is the tide of pay rise which has to be carried out. Many textile and garment enterprises are already heavy burden and difficult to do.

According to a survey, about 20% of small and medium-sized textile enterprises failed to start this year, and some of them switched to other industries.

Four.

raw material

Price increases have not yet been fully pmitted to the downstream garment industry.

This year, lint price is rising, and it is soaring. Since the scale has been up to now, the standard grade cotton has risen by about 5000 yuan / ton, and the price of cotton yarn has also risen sharply, and the rate of increase has exceeded cotton spot, and the turnover is also unusually hot.

But one problem is that lint rose and cotton yarn rose. Why is the fabric and clothing market not too good? If downstream consumption can not fully digest the rise in prices, then the rise of the upstream is virtual inflation, that is, speculation, that is, the foundation is not solid, the bubble will blow up when there will be a break.

This situation has caused a lot of speculation in the market, that is, someone is hoarding cotton yarn, resulting in the market supply of cotton yarn "scarce" false appearance.

I agree with this view that after the financial crisis, the textile and garment enterprises in the lower reaches have not yet fully recovered, and the demand for cotton yarn is unthinkable.

So why is it that "hoarding" is hoarding, is it not worried that the new cotton market will lose everything? In the final analysis, it is estimated that the supply of new cotton will be less in the next year, and speculators will speculate ahead of time.

Above all, we see the fact that the downstream textile and garment industry is facing RMB appreciation and wage increase. Industry profits are constantly being squeezed, facing the situation of reshuffling. Moreover, the price of raw materials has not yet been fully pmitted to downstream enterprises. In the textile and garment industry, and the expansion of domestic sales has not yet fully started, the rising price of cotton has been at risk.

Recently, the policy makers of the country have been constantly showing off the wind, expressing strict control over prices, cracking down on speculation and maintaining market stability, and the policy attitude is very clear.

Over the past few days, there are also reports that the state will throw 600 thousand tons of storage. Although it has not been proved, the characteristics of the current market policy are already very obvious. The probability of cotton price rise in the late period is very low.

Therefore, cotton prices may drop slightly in the near future.