RMB Depreciation, Textile Industry Resurgence

In recent years, China has been affected by the appreciation of the renminbi, the rising cost of labor and raw materials. Textile and garment industry Competitiveness in the world's main markets has been weakened, and the main market share in Europe and the United States has been declining. According to data from the China Textile Import and Export Chamber of Commerce, the export volume of China's textile and clothing decreased by 2.9% in the first half of this year, the first negative year-on-year growth in recent years. Customs General data also showed that in July 2015, China's textile and apparel exports were 27 billion 250 million US dollars, down 10.2% from the same period last year. Among them, textile exports amounted to 9 billion 510 million US dollars, down 5.9%, and clothing exports 17 billion 740 million US dollars, down 12.4%.

In August 11th, the central parity of RMB against the US dollar was 6.2298, a record low since April 25, 2013, a 1136 decline from the previous trading day, the largest single day decline in history. The downward adjustment of the RMB exchange rate against the US dollar means that the real estate and other heavy assets industries will be adjusted, and the resources may be redistributed to small and medium-sized enterprises and new industries, which will help optimize the economic structure. Specific to the impact of related industries, the depreciation of the RMB has a positive impact on export oriented industries such as textiles, instrumentation, communication computers, and so on, and will have a negative impact on the relatively large import assets, such as real estate, energy, aviation and other heavy assets industries.

Although overseas developed markets, especially the European market demand, are hard to improve in the short term, industry experience shows that the depreciation rate of RMB against the US dollar is 1%, and the sales profit margin of the textile and garment industry will increase by 2% to 6%. Moreover, the scale of China's textile and garment industry ranks first in the world, and the impact of exchange rate changes on the industry is huge. The sudden sharp depreciation of the RMB, for the average profit margin of less than 10% of the textile and garment industry companies, the role of self-evident performance boost.

Specific to A share related listed companies, Devaluation of RMB The good export business, especially the textile and clothing leading companies, which account for a relatively high proportion of US dollar settlement business, on the one hand, will contribute to the increase of the company's orders. On the other hand, most of the companies will settle in US dollars, and the exchange rate can also be obtained under the depreciation of the RMB. Among them, the export business of Huafang, URI, Lutai A, Luen Fat shares and other companies accounted for close to or more than 70%, and the exchange gains and losses had a great impact on the profits of enterprises, such as Huafu color spinning last year's exchange earnings reached 8 million 210 thousand yuan, accounting for 4.9% of profits.

However, there are also listed companies, though exchange rate The downward trend is clear about the industry, but most companies have already adopted a series of measures to hedge exchange rate risks, such as import hedging, US dollar financing and forward foreign exchange transactions. The positive impact on corporate performance should be analyzed in specific situations.