RMB Exchange Rate Breaking New High, Foreign Trade Shoe Enterprises Face Survival Challenges

Yesterday, the central parity of the RMB against the US dollar broke through the 7.18 pass and reached a new high since 7.1763, and this is the fourteenth highest level since 2008.

Since the reform of RMB exchange rate in 2005, RMB has appreciated more than 13% against the US dollar in more than two years. In January alone, the appreciation was as high as 1%.

Recently, a survey in Guangdong found that such a speed of appreciation has brought certain challenges to the textile and other labor-intensive export enterprises, and some enterprises have even chosen to move out.

Guangdong Yida textile Limited by Share Ltd is one of the world's largest manufacturers of cotton shirts. Its 2007 sales report shows that sales in 2007 increased by nearly 20% compared with 2006, but profits remained at 2006 level.

Chen Zheng, the head of the company, we lost nearly $10 million in exchange rate losses in 2007.

The person in charge told us that 85% of the raw material was purchased domestically, while 80% of the products were exported abroad.

That is to say, the expenditure of the company is mainly RMB, while the majority of the income is the US dollar.

During the past year, the appreciation of the renminbi was nearly 7%, and the cost of raw materials of the company continued to rise.

But in the face of market competition, the price of products has not changed, resulting in increased sales finally offset by the appreciation of the renminbi.

Chen Zheng, the head of enterprises: we once expected that the average exchange rate in 2008 would be around 7.22.

In fact, up to now, the RMB has exceeded 7.2, which is far beyond our expectation.

In addition to raw materials, another important pressure brought by the appreciation of the renminbi comes from the increase in labor costs.

Huang Lukun, the head of a Taiwan enterprise, said that the wages and overtime pay paid by enterprises now increased by 40% compared with the past. The increase in wages must be paid in Renminbi, which is a great expense for the enterprises with tens of thousands of employees.

Taiwan businessman Huang Lukun: light directly from the staff, each of us will spend an average of 500 yuan or 6 million yuan to increase the cost of the task, then the whole business for the entire operation, our net profit will probably have nearly 0.5 of the impact, this is quite a figure.

The survey found that enterprises affected by the appreciation of the RMB exchange rate mostly concentrated in industries such as textile and shoemaking, which are highly concentrated and highly competitive.

Taking the textile industry as an example, the average profit margin of China's textile industry is only 3%, and the profit of small and medium-sized enterprises is less.

Statistics from the central bank and other departments show that the profit of the textile industry will drop by 2% if the value of RMB rises by 1%.

In 2007, the appreciation of RMB nearly 7%, the impact on the textile industry can be imagined.

Other enterprises that are extensive in operation have also been challenged. The impact of the appreciation of the RMB exchange rate has become a bottleneck that these enterprises can hardly digest after the situation of low price grabbing the market in the past has been changed.

In 2007, in Huizhou, the shoe industry of Guangdong, there were about 300 shoe factories closed and moved out.