How Will The EU Slowdown Affect Chinese Clothing?

When the US dollar continues to be weak and the exchange rate of RMB against the US dollar keeps rising, the days of China's textile and garment industry seem to be bad. Everyone complains that the small profits are gone, the overseas orders are afraid to take over, and even countless manufacturing enterprises have gone bankrupt.

And when the dollar began to strengthen in recent years, the RMB exchange rate against the US dollar no longer rose rapidly. Even in limited callbacks, it was strange that the textile and garment enterprises did not feel lucky because they began to worry that the RMB exchange rate, which had long followed the US dollar, began to strengthen in the world with the gradual strengthening of the US dollar, such as the strengthening of the euro exchange rate.

In fact, the euro has indeed depreciated. In the first few months of this year's stability or even appreciation, in September 2nd, the central parity of the euro for the first time broke through the 1 to 10 mark and seemed to be heading for further devaluation.

This new change has become a new "worry" at the moment. As the largest export market of China's textile and clothing and the only four major traditional export markets of China's textile and clothing market in the first seven months of this year (the four largest export markets for the United States, Japan, Hongkong and the European Union) is the only "bright spot". Whether the EU market will continue to enter the Chinese textile and garment export downstream channel due to the strong RMB exchange rate is becoming the focus of attention.

According to incomplete statistics, thanks to the abolition of the EU quota policy and relatively stable and even strong euro exchange rate environment, the export volume of China's textile and clothing products in the first seven months to the EU increased by 19.96%, compared with the increase in the United States, Hongkong market - 8. 12% and - 20. 4 percent and the increase in the Japanese market by only 0.18%.

As a result, when the US dollar becomes stronger and stronger, the dollar, which is strong with the US dollar, is becoming an unfavorable factor for the export of China's textile and garment products to the EU market.

Then, what will be the impact of the depreciation of the euro on China's textile and garment industry?

How should we deal with it?

Host: the EU market is undoubtedly the "relative" highlight of China's textile and garment export market this year. There are favorable factors at the policy level as well as exchange rate reasons. Now, the euro has begun to depreciate. How far will it affect the export of Chinese textile and clothing products?

Zhang Bin: according to some economic data released by the European Union, the EU economy is showing signs of decline, indicating that the EU's demand for textile and clothing products may also be reduced.

Coupled with the depreciation of the euro against the renminbi and the further weakening of the competitive advantage of Chinese products, the growth rate of EU's textile and garment exports to China in the future may come down.

Ji Zhi hang: the European Union and the United States have been the main areas of textile and clothing exports in China. Since the first half of this year, the growth rate of China's textile and clothing exports to the US has been declining, while the European Union's performance is relatively good.

If the RMB continues to appreciate against the euro, it will affect the export of textile and clothing to the European Union, that is, the export of China's textile and garment industry has experienced a decline in the United States, and it may need to face another severe test, and the EU market will also see the possibility of a slowdown in growth.

Wang Yong Li: we mainly rely on exports to Europe this year to boost sales performance. This year, the EU market is good overall. This is also closely related to the EU's abolition of China's textile quotas this year.

The continued appreciation of the RMB against the euro will increase some unstable factors. We are also worried that this market will become less optimistic after the US market.

In the second quarter of this year, the yuan began to strengthen against the euro and yen. It is expected that China's exports to the European Union, the United States and Japan will fall in the second half of the year. The current export volume of the three major markets, including the re exports through Hongkong, will account for 60% of the total exports of China.

The structure of China's exports to the EU is almost the same as that of the US market, mainly in terms of mechanical and electrical products, textiles and clothing, toys, shoes and so on. The impact of RMB appreciation on the euro on China's exports will also be the same as the appreciation of the US dollar. The most important thing is the labor intensive industries such as textiles and garments.

Gao Yong: in the first half of this year, the growth rate of our textile and clothing exports to the EU was 43%, which is largely due to the broad market of the European Union, and is closely related to the cancellation of China's textile quotas by the EU.

But at present, if the appreciation of RMB against the euro continues, our exports of textiles and clothing to the European Union will be affected to a certain extent.

After all, under the slowdown of the US economy, the EU economy has also been implicated. This environment will inevitably affect the export of our textile and clothing to the international market of major textiles.

Mr Ma: China's exports to Europe are mainly determined by two factors: one is the rate of economic growth in Europe, the other is the exchange rate between the euro and the renminbi.

Europe's economic growth rate has dropped by 1 percentage points, and China's export growth rate to Europe will drop by 7 percentage points.

In addition, the growth rate of China's exports to the euro zone will be down by 3 percentage points by RMB 10% against the euro.

We expect that the growth rate of China's export to the euro area will be reduced to 6% next year.

In view of the fact that China's exports to the euro area are mainly electronic products and textiles, the two industries will be affected by the euro zone slowdown and the depreciation of the euro in the future.

Guangdong provincial foreign trade and Economic Cooperation Department does not want to be named officials: Guangdong's clothing products are mainly exported to the United States and Hongkong, China, but this year, due to the subprime mortgage crisis and weak economic growth, other major markets except the EU are on the decline.

In the first half of this year, Guangdong's exports to the EU showed an upward trend in exports of textiles and clothing, with a total export of US $2 billion 980 million, an increase of 68.4%.

Relatively speaking, the Yangtze River Delta region has developed the EU market earlier. If the RMB continues to appreciate against the euro, it will have a greater impact on the Yangtze River Delta.

But this year, the EU has become the "last straw" for Guangdong's textile and clothing exports. The appreciation of the renminbi against the euro is not a big blow to the Pearl River Delta.

However, to what extent does this effect come to it, or do we need to keep an eye on the exchange rate?

Zhang Bin: actually, from the monthly export data of China's textile and apparel products this year, the export growth rate of China's textile and clothing products to the EU has begun to decline in the past 3 months.

Wang Yongli: if the RMB appreciation against the euro continues to rise, it will have an impact on the export of enterprises, but the impact will not be too great in a short time, because overseas buyers, including the European Union, are basically settled in US dollars, and only a small proportion is settled in euros.

Wang Wang forward: at present, more than 80% of China's textile and garment enterprises are mainly settled in US dollars. The appreciation of RMB against the euro will not be too great from the perspective of trade settlement.

But it is noteworthy that we should be vigilant against the EU's economic downturn, which will add to China's textile and clothing exports.

Mr Ma: the European economic slowdown will be the biggest impact on China's external demand next year.

The slowdown in the euro zone's economic growth rate to 0.1% next year and the euro's continued depreciation of RMB 10% will make China's overall exports to the euro area in dollar terms likely to decline from 26% this year to near zero next year.

Host: so in this situation, will there be corresponding adjustment in China?

Mr Ma: this new impact on China's external demand may lead to further loosening of a series of macroeconomic policies, including monetary and fiscal policies.