RMB Appreciation, Textile Enterprises Will Raise Prices?

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In September 16th, the yuan rose 69 basis points to 6.7181 against the US dollar, which is the new low of the fifth consecutive trading days of the central parity of RMB against the US dollar since 2005.

Since September 10th, the central parity of RMB against the US dollar has surged by 636 basis points.

Many agencies predict that the trend of RMB appreciation is expected to continue in the future.

The Ministry of finance of Xiangcai securities expects that the appreciation of RMB will be between 3%-5% this year, and this increase will be the majority.

Most textile companies want to raise prices.

RMB appreciation has a certain negative impact on China's exports, and textile and apparel industry as a highly dependent industry is sensitive to the change of the RMB exchange rate, especially in the small and medium sized textile enterprises in the industry. Because of the lack of bargaining power, the appreciation rate that can be tolerated is relatively small, so the export of the entire industry will be adversely affected by the appreciation.

Insiders pointed out that the appreciation of RMB has increased the cost and quotation of China's textile and clothing, thereby losing the competitive advantage of China's products in the international market to a certain extent, and the export will be restrained.

Part of the bargaining power of enterprises will be able to shift part of the appreciation pressure through price increases, while the uncompetitive enterprises will be the first to be hit.

At present, the import and export enterprises usually use the US dollar for valuation and settlement, and the resulting exchange rate risk is mainly borne by domestic enterprises.

If the export commodity is locked in foreign currency price, the depreciation of foreign currency will lead to a decrease or even a loss in the profits of enterprises, especially for the large scale complete sets of equipment products with high technology content and long construction period. The exchange rate fluctuates greatly, and the exchange rate risk faced by enterprises is bigger.

This reporter learned from the interview that most export textile enterprises are considering increasing the price of export products to offset the impact of RMB appreciation on enterprises.

In addition to the way to raise the price of products, there are also ways to hedge RMB appreciation by means of hedging.

The staff of the Securities Department of the stock group said to the reporter that the appreciation of the renminbi was very sudden. The company could only consider raising the price gradually after receiving the bill in the future.

At present, the company is relying on financial products to make up for the loss of RMB appreciation.

Lu Tai A's securities department staff said that the company's export products have been raising prices this year, in addition, the company also hedged the way to deal with the appreciation of the renminbi.

In addition, some enterprises adopt RMB settlement to avoid losses caused by RMB appreciation.

Experts expect export growth to slow down.

Prior to this, authoritative estimates have indicated that the net profit margin of the textile industry will decrease by 1% when the value of RMB is increased by 1%, which will further compress its profit margins for the textile industry whose profit margins are already low.

It is also widely expected that the export recovery of textile and garment industry will slow down in the fourth quarter of this year.

In the first 8 months of this year, the export of textile and clothing maintained a high growth rate in the first 8 months of this year, driven by rising demand and rising prices.

In the first 8 months, textile and apparel exports totaled $129 billion 804 million, an increase of 23.75% over the same period last year.

Among them, the total exports of textiles amounted to 49 billion 515 million US dollars, and clothing exports totaled 80 billion 289 million US dollars, with a growth rate of 32.29% and 19.02% respectively.

At present, the growth rate of textile exports is faster than the growth rate of clothing. This situation has lasted for 5 months, and in 2010, textile exports amounted to US $10 billion 159 million, more than the same period in 2008 (the same period in 2008 was US $9 billion 463 million), and the export volume of textiles has been restored to 2008 level after deducting the factors such as product prices.

This shows that as global demand, especially in Europe and America, has begun to improve, the global textile industry starts to pick up again, and the global textile industry is beginning to pick up.

But some analysts believe that the growth rate of exports will slow down.

Kong Jun of CIC believes that the growth rate of textile exports has declined in August, indicating that the boom in global textile and garment production has declined, due to the shrinking demand in Europe and the United States, which will affect the overall growth of domestic textile and clothing exports in the coming months.

However, as the production orders of export enterprises are already in the three quarter, the export growth of the three quarter will still be guaranteed, but the reduction of orders will affect the export volume in the four quarter.

Due to the large increase in the first half of the year, Kong Jun expects the growth of textile and clothing exports will be around 16% throughout the year.

Has RMB entered the rising channel?

After China's resumption of the reform in June 19th this year, many export enterprises are in danger of bankruptcy.

After that, the oscillation rate of RMB against the US dollar increased, but the maximum increase was only 0.9%.

After the adjustment in August, the increase narrowed to 0.3%.

However, since September 9th, the central parity of the RMB against the US dollar has changed the trend of broad oscillation before, and has appreciated 9 consecutive trading days, rising by 910 basis points.

The person in charge of export business indicated that in the 3 month period of September 21st, the appreciation of RMB against the US dollar was nearly 2%.

This is a big blow for many export enterprises whose profit margins are very limited.

"Now we pay attention to the production and operation of enterprises every day, and we must keep an eye on the exchange rate every day.

Now that the exchange rate is changing so much, it is likely that the calculation will be profitable when signing the bill, but it will become a loss at the time of settlement.

According to media reports, the Ministry of Commerce and Ministry of industry and information technology are conducting stress tests on labor-intensive industries in order to clarify the impact of changes in the RMB exchange rate on industries such as textiles, clothing, footwear and toys.

However, the above sources stressed that the renminbi would not be determined to enter the appreciation channel because of the bottom up: "this is a forward-looking plan, and whether it will appreciate is another problem."

"The news has also been confirmed by the relevant business associations.

The person pointed out that this research has been launched in recent months, and has not been informed of clear results for the time being. However, the counterpart chambers of trade unions of several labor-intensive products have roughly estimated that the net profit margin of the industry will drop by 1 percentage points every 1 percentage points, and the average net profit of these industries is only 3%-5%.

Exporters naturally hope that the renminbi will no longer appreciate, and the staff of the above said that the possibility of a revaluation of the renminbi will not be too great.