RMB Appreciation: Foreign Textile Enterprises Should Take The Initiative To Attack

From China foreign exchange Trading center data show that in September 17th, the central parity of RMB against the US dollar was 6.7172, which was 9 basis points higher than the previous trading day. This is the sixth record high since the central parity of RMB against the US dollar.

The industry generally believes that for China's long-term strategic objectives, for the sake of the global economy and Financial strategy The pattern has more initiative, and the renminbi must appreciate steadily. However, we should also see that the impact of the continuous rise of the renminbi on China should not be underestimated.

First, as RMB The most "injured" companies expected by the expected appreciation are very sensitive to the appreciation of the renminbi in the export oriented foreign trade enterprises. On the one hand, the exchange rate changes frequently, and the cost is difficult to control. On the other hand, China's enterprises are mainly low-end manufacturing industries, and it is difficult to pass the price increase to the cost, which directly leads to a decline in export earnings. Generally speaking, such enterprises rely mainly on export channels and product quality to survive. Among them, labor costs, overseas orders, RMB exchange rate and export tax rebate policy are the most important factors. Almost all of these are not in the hands of the enterprises themselves.

Recently, there is a research report on the impact of RMB appreciation on export enterprises. The total sample size is 1900, involving export enterprises in more than 10 provinces and municipalities. The report shows that most export enterprises can tolerate RMB appreciation rate of less than 2%, which accounts for 39.7% of the total sample size. In turn, enterprises that can tolerate RMB appreciation of 2%-4% account for 33.8%, and enterprises that suffer from 4%-5% appreciation account for 19.1%, while those who suffer from 5%-6% appreciation account for 4.95%, while those who tolerate 6% or more are only 2.42%.

It can be seen that more than 7 of the export enterprises can tolerate an appreciation of less than 4%. In addition, the report also shows that nearly 57% of small and medium-sized export enterprises have a profit margin of less than 5%, 28% of profits and 28% of 5%-10%, only 5.45% of 10%-15%.

It is not hard to see that the profit margins of small and medium-sized export enterprises in China are not high, especially in the labor-intensive manufacturing industries such as textiles, clothing, shoes and hats. 84.07% of the export enterprises have a profit margin of less than 5%.

Obviously, this requires our export enterprises to do more high value-added and technological products, from labor intensive to capital intensive, and improve core competitiveness, so as to minimize losses.

Secondly, for the capital market, due to the appreciation of the renminbi, the listed companies in related industries will also have a certain impact. The appreciation of the renminbi will lead to asset revaluation, and the value of Renminbi denominated resources, real estate and financial assets should also be revalued.

For most people, the appreciation of the renminbi will bring great benefits to banks. Because banks, as the most concentrated industries, are also affected by the appreciation of the renminbi. The appreciation of the renminbi will not only trigger a revaluation of assets, but also reduce the bank's bad debt rate.

Nevertheless, we still need to see that when there is good, it will also increase the risk assessment of financial institutions. After all, at present, the "overseas territory" of China's banking assets is not very small. If the RMB appreciates rapidly, the profits of these overseas branches may not be enough to lose on the exchange. From the weight of the banking sector in the stock market, if banks have problems, then the impact on the stock market is self-evident.

In any case, the author believes that for China's long-term strategic objectives, the renminbi needs to appreciate steadily in order to take more initiative in the global economic and financial strategic structure. However, instead of passive appreciation, it is better to take the initiative and make better use of the opportunities brought by appreciation.