Euro Turmoil Affects China'S Textile And Apparel Exports

With the passive appreciation of the RMB against the euro, the industry which is closely related to it has begun to be concerned by the market.

In particular, the export textile and garment enterprises that have not yet recovered from the financial crisis will again be hit by the European debt crisis after the US financial crisis.

According to central bank RMB exchange rate intermediate price, as of May 24th, the RMB to the euro 1:8.5404, the cumulative appreciation of 14.5% in the year.

Over the same period, the euro has depreciated by nearly 10% against the dollar in the same period.

RMB's passive appreciation against the euro

The trillions of us aid programs temporarily curbed the contagion of the European sovereign debt crisis, but the market remains skeptical about the rebound in the euro's exchange rate.

This year, the euro has fallen by nearly 14% against the US dollar.

Since the renminbi is actually pegged to the US dollar, it has led to a passive appreciation of the renminbi.

Ministry of Commerce spokesman Yao Jian said that from the beginning of this year to May 14th, the yuan had appreciated 14.5% against the euro.

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.

The appreciation of RMB against the euro in the past five months "will cause huge cost pressures to Chinese exporters and will also have an impact on the adjustment of trade policies."

Yao Jian, spokesman of the Ministry of Commerce.

Yao Jian said that as of May 14th, the yuan appreciated by 14.5% against the euro, which would cause huge cost pressures to our exporters.

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.

According to customs statistics, in the first 4 months of this year, China

However, some scholars in China do not seem too worried about the appreciation of the renminbi.

Song Hong, director of the International Trade Research Institute of the Institute of world economics and politics of the Chinese Academy of Social Sciences, believes that the debt crisis in Europe has not yet reached the level of the real economy.

It is different from the financial crisis. The financial crisis has led to a primary downturn. Now this debt crisis is a problem in the process of stimulating economic growth, and the impact is much smaller. Even if it has an impact on the real economy, it will take a long time.

On the whole, the appreciation of the renminbi will first affect China's exports, but a moderate appreciation is not unbearable.

Chen Lu, chief economist of Haitong Securities macroeconomic, believes that the biggest problem for export enterprises is the rising cost and inadequate operating rate caused by the shortage of labor force, rather than the order problem before.

At this time, a modest appreciation of the renminbi may be more beneficial.

Export textile enterprises to deal with exchange rate fluctuations

The impact of European sovereign debt crisis on China's foreign trade will be more serious.

Huo Jianguo, President of the Ministry of Commerce, said that it is expected that in 5, June, and even the third quarter, the performance will be more obvious, and my export growth to Europe may be down by 6-7%.

Obviously, in this export crisis, the export of our textile and garment enterprises will face the blow from Europe after the US.

According to the latest data released by the Ministry of Commerce, in 2009, the total value of imports of textiles and raw materials from the 27 countries of the European Union decreased by 6.2% compared with the same period last year, but still reached 42 billion 832 million US dollars. China has become the largest source country of imported textiles and raw materials from the 27 countries of the European Union, and the amount of textiles and raw materials imported from China accounts for 41.1% of the total value of the EU's imports.

Data show that in recent years, the share of China's textile and clothing exports to Europe has been maintained at around 20% of the total volume.

Insiders estimate that

The Great Wall securities strategist La Bo said 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 order to deal with the impact of exchange rate fluctuations on the company, export textile enterprises also have their own countermeasures.

For example, Halliday is to avoid exchange rate fluctuations by means of long-term hedging.

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.

According to Halliday insiders, in order to deal with the sharp depreciation 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 on a certain day to rebalance.

In addition, there are also parts.

Jiangsu Shun Tian secretaries said that the company quoted price is adjusted according to the expected exchange rate. If the exchange rate of this single foreign 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 to the above two points, there are also some textile and garment enterprises with relatively large scale and relatively strong bargaining power to adopt the bargaining method to deal with the fluctuation of exchange rate.

Of course, the way to make up for the fluctuation of exchange rate by raising product prices is only for those enterprises that are large in scale and intimately related to their customers.