RMB Appreciation And Cold Current Test Leather Foreign Trade Enterprises

For the first time in April 10, 2008, the US dollar fell below 7 yuan 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 was "broken 7" for the first time, and it was 6.9920 yuan for the exchange of 1 dollars.

The appreciation of the renminbi has fallen below the 7 mark against the US dollar.

For the export textile and leather enterprises priced in US dollars, the sales profit margin will drop by 2%-6% when the RMB exchange rate appreciates 1%.

Under the expectation of RMB appreciation, export textile and leather enterprises actively take measures to reduce exchange quotas, strive for non US dollar quotations, flexible use of financial instruments and other methods to deal with exchange rate risks.

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.

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.

How big is the "breaking 7" of the renminbi?

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

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.

In 2007, China's cumulative trade surplus was US $262 billion 200 million, of which China imported 69 billion 380 million US dollars from the United States, exported US $232 billion 700 million, and the surplus amounted to US $163 billion 320 million.

This means that half of China's exports are consumed in the US market.

However, as the consumer crisis triggered by the US subprime mortgage crisis began to spread from the end of last year, the latest survey showed that the US consumer confidence index in March was only 64.5, the lowest level since 2003, which has dropped sharply for third consecutive months.

With the globalization of the world economy, a large number of Chinese foreign trade enterprises are gradually feeling the external pressure.

In addition to tighten the wallet, the total appreciation of RMB rose to 6.42% in 2007, two times that of 2006. The direct result of the increase in the cost of business is rising.

The winter of 2007 is extremely cold for Chinese enterprises still relying on exports.

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.

The appreciation of RMB helps China's industrial structure to improve.

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.

The appreciation of the renminbi affects most industries: insiders say that the appreciation of the RMB will push the share price trend of listed companies to show greater differentiation: 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.

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.

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.

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.

The impact of the US subprime mortgage crisis on the industry is beginning to show: at this year's Canton Fair, enterprises are showing concern about the subprime crisis. "It is expected that our company's export orders to the US will decrease this year, but how much will it decrease?"

Gong Qing, foreign trade manager of Shandong Fu Hao Leather Co., Ltd. said, "although the number of merchants contacted at this year's China Fair is larger than in previous years, the price of orders is difficult to negotiate."

"I must consider the factors of RMB appreciation to reserve certain quotations, but the pressure is really great. Many customers are coming to the Chinese products with high quality and low price. Now they also feel that they can not afford it. This business is really more and more difficult to do."

Gong Qing said.

In fact, many export enterprises are worried about the export situation this year. During the China Fair, many export enterprises said that this year is likely to be faced with the predicament of the loss of orders and the decline in operating conditions.

The subprime mortgage crisis in the United States is spreading more and more widely, and even continues to spread. The United States is a very important export market in China. If the subprime crisis or other factors influence, the domestic consumption will and market demand will drop, which will affect China's exports to varying degrees.

Another group of statistics from the Organizing Committee of the China Fair also confirms this view. During this year's China Fair, exports of textile and clothing products which were highly dependent on the US market also fluctuated, with a turnover of $1 billion 844 million, down 0.54% from the previous one.

In this regard, industry experts, Wang Qian analysis, general manager of an information consulting company in Shanghai, pointed out that the United States is the largest importer of clothing in the world, and over 15% of China's clothing exports are sold to the United States.

Due to the impact of the subprime crisis, the volume and price growth of clothing exports to the US began to decline steadily last year.

"In January this year, the unit price of clothing exports to the United States rose, up 10.17% compared to the same period last year. However, the price increase has not been fully understood and accepted by US retailers. The number of garment exports showed a sharp decline in that month."

Wang Qianjin said.

The US subprime mortgage crisis has led to global economic slowdown and consumption, and rising costs of raw materials and appreciation of the renminbi.

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 expressed their doubts.

A foreign trade manager of Ningbo Tong run Minmetals Import & Export Co., Ltd. said that the "breaking 7" of exchange rate 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 speed of appreciation is faster, and it can only undertake the appropriate loss."

In addition to raising the price according to psychological expectations, "China"