Bright Sword: Textile Enterprises Should Deal With Four Magic Weapons Of Exchange Rate Changes (1)

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The appreciation of RMB is advantageous to import and disadvantageous export. Therefore, the mode of processing trade from raw materials and products sold abroad to foreign countries is easier to enhance the profits of enterprises.

The issue of RMB appreciation will become a "big worry" for small and medium-sized export enterprises in the coming period. Is there any way to win short-term victory, which will enable them to win enough adjustment time when RMB appreciation? See this topic.

By means of capital plan, management authorization, approval and other changes in interest rates, enterprises can save part of the cost, and then use the forward selling and settlement tools to lock in the exchange rate and ease the financial difficulties.

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Nine stellar Technology: start settling funds

"Now, our company has changed back to processing trade."

In July 14, 2010, Ceng Xiang, chairman of the three dimensional digital textile company, told reporters that "because of the appreciation of the renminbi and the rising price of domestic raw materials, the company is trying to avoid using domestic raw materials."

Zeng Xiang was the first group of Hongkong people who came to Dongguan to run the textile industry. In the 40 years of the textile industry, because of their authority and position in the field of textile technology, he was honored as "Zeng Ye" by the people in the industry.

In recent years, he has had to adjust his strategy frequently.

There are two main types of textile export enterprises in China: first, the general export enterprises, which do not earn much at present, earn a little profit from export tax rebates; two, they are

Mr Tsang said that in the past three years, his textile companies have "changed" in these two export enterprises three times.

Initially, the company adopted the "three to one supplement" processing trade mode.

However, after the outbreak of the financial crisis in 2008, the prices of raw materials such as cotton and cotton yarn dropped sharply, and the export rebate rate of textile and garment increased from 11% to 16%.

"In 2008~2009, the company changed to purchase raw materials from the mainland for export rebates."

Zeng said that although the financial crisis was in the deep valley period, "at that time, the profits of enterprises were 4%~5%".

Unexpectedly, time passed.

The domestic cotton prices in 2010 made the textile enterprises both surprised and puzzled.

In October 2009, the market price of cotton was still 12500 yuan / ton, and cotton price rose to 19500 yuan / ton in July 2010, which rose more than 50%, hitting a new high in the past ten years.

Considering the high price of domestic raw materials, the export tax rebate is far from being able to compensate for the losses of textile enterprises. In addition, the appreciation of RMB is favorable for imports and unfavorable exports.

After pforming into a processing trade enterprise, Zeng's textile company alleviated the pressure brought by the appreciation of RMB.

However, the production cost of export enterprises is still rising.

"Since 2009, the total cost of labor and raw materials has increased by 30%.

The company can not pfer all the cost of the increase to the customers, and must digest part of it. Now the profit of the enterprise is not more than 4%.

Mr Tsang said, "the products exported by the company are settled in US dollars, but we have to pay wages in Renminbi instead of RMB. The appreciation of RMB will indirectly increase the cost."

No doubt, in the appreciation of RMB, the foreign raw material market is relatively cheap, importing raw materials from abroad and developing processing trade is more beneficial to enterprises.

However, the mode of processing trade is not suitable for all export enterprises.

Mo Jintao, general manager of Guangzhou Ao Mei Shi soap industry Co., Ltd., told reporters, "our company was also a" three to one supplement "enterprise before 1998, and later changed from the domestic procurement of raw materials.

It is also very difficult for enterprises to change, because our company needs to buy more raw materials, and there are also many inconveniences in importing raw materials to deal with various tariff issues.

Zeng also understands that pforming into a processing trade enterprise can not solve the fundamental problem of enterprises.

His strategy is: 3D digital textile company independently develops and designs high added value fabrics and garments. After receiving overseas orders, they turn to trading companies to find factories for production.

At present, the high-end orders are completed by the foundry factory in the Pearl River Delta. In the future, Zeng hopes to complete the foundry work by cheaper Southeast Asian countries, so as to reduce costs and increase profits.

His long-term goal is that the enterprise can finally go to the domestic market and successfully create its own clothing brand.

There are two sources of corporate profits: one is to increase sales and two is to reduce costs.

Under the economic downturn and exchange rate fluctuations, it is more difficult for enterprises to increase their exports in the short term, but the space for export enterprises to control costs through capital control is still very large.

Nine Jie Hongbo, chairman of star technology, said in an interview with reporters.

He cited the example of COFCO.

Before 2002, COFCO's funds were decentralized, which caused a problem: each member unit set up their own bank accounts, and applied for bank loans respectively. The funds and accounts of the group were scattered and independent, and the deposits, loans and financial expenses were very high, and the management difficulty was also very great.

Two ways to avoid exchange rate risk: financial instruments

In order to change the financial situation, COFCO has decided to set up a financial company, and COFCO finance has made use of the power of the fund management solution provider to establish a unified centralized fund management system.

With the help of the system, COFCO realized the centralized opening and management of bank accounts. The bank accounts of more than 500 member units were networked with financial companies, and the funds scattered around the banks were collected to the main accounts of financial companies in 7 banks through online banking.

At this point, COFCO financial company can always understand the financial status of the members of the group and adjust the surplus and deficiency within the group so as to make full use of its own funds to reduce bank liabilities and reduce the cost of capital use.

Since 2002, COFCO financial company has directly saved the financial cost of the group by 12 billion yuan, reducing the debt ratio of the group by 5~8 percentage points.

"Enterprises can save part of the cost through the way of capital plan, management authorization, approval, etc., combined with the change of interest rates.

In this case, it is a great challenge for exporters to lock down the exchange rate and avoid exchange rate risk by means of forward selling and foreign exchange instruments.

Jie Hongbo thinks.

Jie Hongbo's "forward sale and sale" is the most commonly used financial tool to avoid exchange rate risk.

Shanghai Pegasus import and Export Trading Co., Ltd. chose to hedge the exchange rate risk by means of long-term hedging.

However, Mao Xiahua, director of the company's trade department, told reporters that the company's export volume reached $300 million in 2009. The number of hedging purchases for long-term Forex sales was less than 10%.

"The rate of forward settlement is relatively high, and it is difficult for enterprises to take up too much proportion."

Mao Xiahua said, "banks also do not want all the products of enterprises to make long-term settlement, thereby pferring all risks to banks.

Besides, this is a new financial tool. Most enterprises do not have the bottom of their minds. They must take a step closer.

Forward selling and selling is the main way of avoiding risks in China's financial market. However, it has higher requirements for the accuracy of the exchange rate trend, and the rate is relatively high. Therefore, many export companies do not carry forward hedging in order to lock risks.

Besides the forward selling and selling business, the current exchange rate hedging products mainly include structured foreign exchange business, selective trading, currency swap and so on.

In addition, the appreciation of the renminbi also makes us dollar loans more favored by enterprises.

CSCC has said that the trend of continued appreciation of the renminbi will continue to reduce Renminbi loans, increase foreign exchange liabilities and reasonably avoid exchange rate risks.