Textile Export Enterprises Seek New Strategies To Avoid Exchange Rate Risks And Deal With The Policy Of Exchange Rate Reform

July 21st marks the 7th anniversary anniversary of RMB exchange rate reform.

Looking back on the course of the past 7 years, the reform of RMB exchange rate has stopped and accelerated this year. No matter in April, the floating rate of RMB to us dollar exchange rate fluctuated from 0.5% to 1%, or the direct trading of RMB and yen from June, and the RMB exchange rate formation mechanism is gradually improving.

Undoubtedly, foreign exchange reform has great influence on China's foreign trade enterprises.

Data show that after the appreciation of the renminbi, the trade surplus has decreased the most.

In the case of keeping the scale of foreign direct investment unchanged, China's annual exports will be reduced by about 0.8%, imports will be reduced by about 0.4%, and the trade surplus will be reduced by about 2.1 percentage points per 1% appreciation.

The impact of foreign exchange reform on China's textile export enterprises is especially far-reaching.

China is the largest textile in the world.

In the production and export countries, the textile industry has a larger dependence on foreign trade, and Chinese textile export enterprises have made difficult pformation under the new market-oriented exchange rate mechanism.

Bidirectional floating to achieve qualitative change in foreign exchange reform

In July 21, 2005, China began to implement a regulated and managed floating exchange rate system based on market supply and demand and reference to a basket of currencies.

On the same day, the RMB appreciated against the US dollar by 2%, to 8.11: 1.

Since then, the RMB has fluctuated to the US dollar in the range of 0.3% per day, and the floating rate of non US dollar against the RMB exchange rate is less than 1.5% per day.

Since then, the RMB exchange rate has no longer pegged to the single dollar, and gradually formed a more flexible exchange rate mechanism.

In September 2011, the RMB exchange rate broke the unilateral appreciation expectation, and the RMB exchange rate depreciation in overseas non principal delivery foreign exchange market.

365 yarn network analysts believe that the RMB from unilateral appreciation to two-way floating, to achieve a qualitative change in the exchange rate.

Chen Daofu, director of the comprehensive research office of the Finance Research Institute of the State Council Development Research Center, said that for overseas renminbi assets, two-way fluctuations in the RMB exchange rate provide two-way trading opportunities, and the liquidity of these assets may increase, and the two-way supply and demand of overseas assets will be easier to achieve.

This year, China continues to intensify its efforts to restructure foreign exchange.

In April 16, 2012, the people's Bank of China announced that the floating price range of RMB to us dollar exchange rate would be expanded from 5 to 1%. At the same time, the foreign exchange designated banks should provide the customers with the difference between the US dollar maximum spot sale price and the minimum spot purchase price on that day, and the difference should not exceed that of the middle day exchange rate from 1% to 2%.

This decision is considered an important measure for the reform.

Lagarde, President of the International Monetary Fund, said this is an important step in expanding the flexibility of the RMB exchange rate.

"Two-way floating and increasing exchange rate flexibility will help to promote China's capital account liberalization, guide resources to the domestic sector of the service sector, promote industrial upgrading, and reduce excessive dependence on exports.

When the exchange rate is more determined by the market, RMB assets have higher liquidity and pparency, and overseas investors are more willing to negotiate business with Chinese enterprises.

The relevant person in charge of the people's Bank of China told reporters.

Undergo pformation pains

"But for foreign trade enterprises, the 7 years of foreign exchange reform have been greatly affected.

Among them, the most influential textile industry is the labor-intensive industry, and the textile enterprises have experienced the pains of pformation and the hardships of growth.

Tan An, senior consultant of the China Federation of industry and Commerce textiles and clothing, told reporters that the continued appreciation of the RMB has compacted the profit margins of China's textile exports.

Large competitive enterprises have certain bargaining power and can absorb part of the losses, but small and medium-sized enterprises suffer heavy losses.

As far as we know, at the beginning of the reform, there were no corresponding evasion measures. After the appreciation of the RMB, the textile exporters lost 1 million yuan.

This view is supported by the rise and fall of a private textile enterprise in Tianjin.

Zhao boss, who was once in great debt, is now heavily indebted. Although he is reluctant to say much, he still dare to say: "in 2010, it was difficult for enterprises to get out of the impact of the international financial crisis, but they encountered double blow to the reform of the exchange rate and the export tax rebate. The development of enterprises was exacerbated by a loss of about 2000000 yuan.

Because I didn't want to let my employees stay out of work for many years, I still barely supported it.

Transformation is easier said than done, and it is not achieved overnight.

Wang Li, manager of the foreign trade department of Guangdong textile import and Export Group, also admitted that in recent years, the company has been making a difficult pition, producing products with higher added value and seeking new markets.

However, for large enterprises, pformation can not be completed in a short time.

Looking for new ways to avoid exchange rate risks

This year, the exchange rate of RMB against the US dollar has exceeded the expectations of economists at the beginning of this year.

In the future, the RMB exchange rate will be more flexible, and the amplitude of two-way fluctuation will also be greater. This means that more complex trade settlement is a greater risk for foreign trade enterprises.

To this end, Chinese textile enterprises are actively seeking new ways to avoid exchange rate risks.

Xinshen group is one of the 10 largest flax enterprises in China. It was once a 100% export company.

As the difficulty of export increases, Xinshen group gradually increases the proportion of domestic sales, and the export proportion will drop to 60% this year.

At the same time, Xinshen group is seeking pricing power at home and abroad.

Suzhou Qingtian Enterprise Development Co., Ltd. is a textile and garment manufacturer, mainly exporting, and also a domestic ODM (original designer).

Zhou Lihua, general manager of the company, said that the company has made technological pformation to the production equipment, and its staff has been reduced by about 42% and the labor cost has been reduced.

Yu Zhengming, who has been engaged in the textile industry for many years, prescriptions for enterprises to elongate the industrial chain so as to increase the profit margins of enterprises.

"This is far from enough."

Tan An believes that the exchange rate reform has forced the upgrading of the textile industry. Export-oriented enterprises should regard exchange rate fluctuation as a normal state, optimize product mix, improve the technological content and added value of products, and accelerate pformation so as to take the initiative in dealing with exchange rate fluctuations.

"In addition, under the two-way fluctuation of the RMB exchange rate, export-oriented enterprises should accelerate the pformation of the settlement mode, and cross border trade RMB settlement is favored by foreign trade enterprises. Through RMB settlement, the exchange losses can be effectively reduced."

The people's Bank of China believes that textile enterprises should use financial derivatives and multi currency settlement to learn to avoid exchange rate risks by means of long-term settlement and exchange rate fixing.