RMB First Broke "7" Against The US Dollar, Affecting The Textile And Leather Industry

The people's Bank of China authorized the China foreign exchange trading center to announce that in April 10, 2008, the middle price of the exchange rate between the US dollar and other trading currencies in the inter-bank foreign exchange market was RMB 1 yuan to 6.9920 yuan, 1 euros to RMB 11.0715 yuan, 100 yen to RMB 6.8951 yuan, 1 Hong Kong dollar to 0.89788 yuan, 1 pounds to RMB 13.8116 yuan.

For the first time in the past 7 years, the US dollar has fallen below the 7 yuan mark against the Renminbi for the first time in more than ten years.

According to the latest data released by the China foreign exchange trading center authorized by the people's Bank of China, the RMB exchange rate between the RMB and the US dollar in the inter-bank foreign exchange market has broken 7 for the first time, which is 6.9920 yuan to 1 US dollars.

The central parity of the RMB against the US dollar is now "breaking 7", which has been anticipated by market participants.

In recent months, the RMB has been accelerating appreciation. After last year's appreciation of 7% against the US dollar, the RMB appreciation rate has accelerated further this year, and has appreciated 4.47%.

In July 2005, China started the reform of the RMB exchange rate formation mechanism, and the US dollar exchange rate was no longer limited to 8.28 yuan.

At the current rate of RMB against the US dollar before the exchange rate reform in 2005, the renminbi has appreciated by more than 18% against the US dollar.

That is to say, the same exchange of 1 dollars can now cost less than 1.28 yuan.

The Xinhua news agency said that at present, the uncertainties in the world economic situation are increasing, and the US dollar continues to depreciate. The trend of the RMB exchange rate is particularly attracting attention.

This year's government work report points out that in 2008, we will improve the RMB exchange rate formation mechanism and enhance exchange rate flexibility.

This means that the RMB exchange rate volatility will further increase.

RMB appreciation: or influence the 9 industries, insiders said that the appreciation of the RMB will push the share price trend of listed companies to become more differentiated. Because the sensitivity of different industries to RMB appreciation is different, the impact of the relevant listed companies will also be different.

On the whole, the sales volume of export oriented enterprises may be reduced due to the rise in product prices, resulting in a greater impact on business performance in the short run.

Insiders said that from this perspective, the appreciation of the renminbi will push the share price trend of listed companies to show greater differentiation.

Aviation Industry: it has benefited greatly.

As a large number of industries holding foreign currency denominated assets / liabilities, the aviation industry can be regarded as the biggest beneficiary of RMB appreciation.

Insiders say domestic airlines hold large amounts of foreign currency liabilities, especially in the US dollar.

Taking China Southern Airlines as an example, its asset liability ratio has basically maintained at around 70%, of which 78% of the financing leases are USD liabilities, 20% is yen liabilities, and 54% of bank borrowings are USD liabilities. The appreciation of RMB will increase the exchange gains and losses of airlines. Besides, the decrease of aviation oil and aviation material costs brought by the appreciation will also benefit all airlines.

But in the case of more competition, the growth of airline performance is very limited.

Banking: the overall impact is limited.

The impact of RMB appreciation on banks has 5 main aspects: net assets and liabilities, structural adjustment of assets and liabilities, income structure, capital adequacy ratio and indirect effects from customers.

From the perspective of income structure, the appreciation of RMB will lead to increased exchange earnings and increased risk of foreign exchange financing.

Petrochemical Industry: the impact is slightly positive.

The petrochemical industry has a strong dependence on the international market, especially the bulk raw materials. Therefore, the change of the RMB exchange rate will directly affect the profits of the enterprises.

However, the dependence of different sub sectors on the international market is different, and the impact of RMB appreciation on these sub sectors is also different.

The industry believes that the continued appreciation of the renminbi will further strengthen imports of high value-added products, such as synthetic rubber and synthetic resin, and increase the share of international products in the domestic market. At the same time, the profit margins of resource chemical products will be further compressed.

The steel industry is neutral, but the impact is limited.

The impact of exchange rate adjustment on the steel industry is mainly reflected in the import and export of raw materials and finished products.

For imports of finished products, the rise in the RMB exchange rate will lead to a reduction in the prices of imported products. If the paction costs are ignored, the rate of appreciation of the exchange rate is the ratio of the decline in import prices.

For exports of finished goods, the upward adjustment of the RMB exchange rate will have an adverse effect, which will weaken the motivation of domestic exports, but the degree is limited.

Real estate industry: to promote the rise in real estate prices.

The appreciation of RMB will help improve the demand for real estate by domestic and foreign capital, and the effect of foreign capital demand is greater than domestic demand effect.

RMB appreciation is also conducive to improving the inventory value of Real Estate Company and reducing construction costs.

Insiders said that the exchange rate fluctuations and the real estate prices are basically positive correlation.

In real estate listed companies, property holding listed companies such as Financial Street, investment real estate, small commodity city, overseas Chinese town, and listed companies with large land reserves, such as Vanke and Jindi, will enjoy the benefits of exchange rate appreciation to the greatest extent.

Textile industry: negative effects can not be ignored.

On the whole, the appreciation of the RMB exchange rate has a great impact on the textile industry, but the profit rate of the leading enterprises is higher, and the bargaining power with the international manufacturers and retailers is stronger, so the negative impact of appreciation is less than that of the whole industry.

According to the relevant data, the international dependence of the textile industry is 40%, while the apparel industry is higher. Only from the price of products, the appreciation of the RMB will inevitably weaken the international competitiveness of the textile industry.

The exception is China's wool textile listed companies. These companies need more than 70% of wool from Australia and other places, and products are mainly domestic sales, so this part of the listed companies will benefit from the appreciation of the renminbi.

Power industry: the overall impact is positive.

Some power companies will benefit from the appreciation of the renminbi, which can be roughly divided into the following situations.

The company's foreign currency liabilities are larger than foreign currency deposits, and appreciation gains foreign exchange earnings, such as Zhang Ze electric power, Huaneng International, Guodian electric power, Shanghai electric power and Shen Neng shares.

Heavy oil depends on imports, and fuel cost pressure has eased slightly after the appreciation, such as Shennan power and deep energy.

Generally speaking, most power generation companies are in the domestic market, and the appreciation of RMB has little direct impact on the power generation business.

Nonferrous Metals: most favorable factors.

For the non-ferrous metal listed companies with a large proportion of imports, the appreciation of the RMB is a great advantage, especially those listed companies whose raw materials are imported ore and domestic products.

According to the insiders, the import volume of China's non-ferrous metal ores is close to US $20 billion every year, and the trend is increasing year by year. If the RMB exchange rate continues to adjust upward, it will effectively reduce the cost of ore importing relevant listed companies in Renminbi, and increase the profits of enterprises.

Commodity retail enterprises: direct benefit.

The appreciation of the renminbi in reducing the price of imported goods also enhances the actual purchasing power of domestic consumers, thereby enabling the retail businesses to benefit directly.

What is the impact of "breaking 7"?

In April 10th, the exchange rate of RMB against the US dollar reached 6.9920:1, so the RMB exchange rate against the US dollar finally broke 7.

In July 21, 2005, the people's Bank of China announced that the official exchange rate of the US dollar to RMB was adjusted from 8.27 to 8.11, and the RMB increased by about 2.1%. At the same time, we abolished the monetary policy which originally pegged to the single dollar and began to implement a regulated and managed floating exchange rate system based on market supply and demand and reference to a basket of currencies. Up to now, it is less than 3 years.

For the appreciation of the renminbi, many experts and scholars have theoretically deduced the impact on China's economy, such as affecting China's exports and changing the favorable balance of trade.

But in the past 3 years, people have seen that the surplus of China's imports and exports has not been changed.

The appreciation of the renminbi against the US dollar is certainly the general trend on the one hand, but on the other hand, it is closely related to the US subprime mortgage crisis, the economic recession and letting the US dollar depreciate.

Theoretically, the appreciation of the renminbi against the US dollar will change the trade pattern between China and the United States.

After the appreciation of the renminbi, the prices of Chinese exports will rise in the US, and the prices of imported American goods will become cheaper.

As a result, the export of products will be negatively affected by the appreciation of the renminbi, and will benefit the import of products and the Chinese people's holding of Renminbi to the US.

Through the degree of dependence on exports, we can know which industries in China are highly correlated with exports.

In 2006, more than 40% of China's export dependent industries were electronic equipment, instrumentation and office equipment, leather and fur products, furniture manufacturing, textile and footwear manufacturing.

Besides, the export dependence of shipping industry is quite high.

In these industries, the US market accounts for about 30% of China's total exports.

However, only depending on the degree of dependence on exports can not fully show that the export of the industry will be affected after the appreciation of the renminbi.

There are two reasons: first, if compared with foreign products, the price advantage of the product itself is large enough, and by strengthening management and using various policies, the cost can be reduced in a timely manner. It will not be affected too much. Secondly, in the production process, how much raw materials and technologies come from the import, and if the import of raw materials and technology is relatively large, the production cost will be greatly reduced.

For example, at the beginning of the appreciation of RMB, many people think that the household appliance industry is a traditional export oriented enterprise, and the household appliances are low value-added products. Most of the raw materials are domestic supply, and the proportion of exports is large. Therefore, the appreciation of RMB has a greater negative impact on the household electrical appliance industry.

However, after the appreciation of RMB has entered the channel, people are surprised to find that the electronic information industry still maintains a relatively high growth rate.

According to the public figures of relevant departments, the main business income of the electronic information industry increased by nearly 20% from January 2007 to October.

Some experts pointed out that the reason is that the negative impact of RMB appreciation on export earnings is being diluted by the positive effects of imported raw materials.

In fact, a large proportion of the copper and aluminum materials needed in the air conditioning industry, LCD screens and plasma display panels in the color TV industry are imported from abroad.

Some experts believe that the appreciation of RMB will help China's industrial structure upgrade.

For a long time, Chinese products have won a large number of competitive advantages in the international market with the help of low labor prices.

In the case of good market conditions, the impulse to take the initiative to upgrade technological level is not strong.

With the appreciation of RMB, the profits of export enterprises will be less and less.

In order to maintain the normal operation of enterprises, upgrading industrial technology is a good opportunity.

Because of the appreciation of the renminbi and the increase in purchasing power, the cost of acquiring advanced technology abroad will be reduced.

For ordinary people, it can benefit directly in the process of RMB appreciation.

Because of the appreciation of the renminbi, the price of imported goods has decreased.

At the same time, it also enhanced the actual purchasing power of domestic consumers.

If you can take the renminbi to go abroad to consume, the benefits will be even greater.

The eve of RMB's "breaking 7": the RMB exchange rate accelerated by foreign trade enterprises and exchange rate races is exploring the ability of China's import and export enterprises to withstand 7 psychological barriers.

On the eve of "breaking 7", some foreign trade enterprises accepted the media coverage.

This week, a foreign trade manager of Ningbo run Yun Minmetals Import & Export Co., Ltd. said that the exchange rate "breaking 7" is only a matter of time. Many foreign trade enterprises have expected the current appreciation rate to be adjusted accordingly.

"We estimate that the exchange rate will be at least 6.8 this year, and now the quotations for new customers and new products have been adjusted according to this standard."

The manager said, "now only the expected exchange rate and the appropriate increase in price, but the old customer's contract can not be changed, the appreciation speed is faster, and it can only undertake the appropriate loss.