The Depreciation Of RMB Is Not A Spur Exchange Rate.

In August 11th, the central bank announced that it would further improve the RMB exchange rate quotation from now on, and the middle price will refer to the closing rate of interbank foreign exchange market.

On that day, the central parity of RMB dropped by more than 1000 points, the largest decline in history.

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The corresponding increase in purchasing power of foreign currencies is bound to affect China in the short term.

Clothing export is good, but in the long run, it is not a master key.

RMB devaluation brings favorable export

After the depreciation of the RMB, the RMB against the US dollar fluctuated downward.

Class companies often have outstanding stock prices.

In August 11th, the central parity of RMB against the US dollar was 6.2298, which was 1136 basis points lower than the previous trading day's median price. The textile and apparel stocks were eye-catching all day, and the plate rose more than 5%, of which ten stocks were trading on limits.

Since August, the textile and garment sector has increased by 17.39% overall, for instance, the monthly gains of Zhonghe and Jihua Group were 64.1% and 50.9%, respectively, all over 50%.

The stock market rally is just a microcosm. The proof of macroscopic data may be more intuitive.

Assuming that we do not consider hedging, order pricing, batches, orders, foreign exchange fluctuations, imports of raw materials and equipment, foreign exchange liabilities hedging and other factors, the devaluation of export enterprises' performance elasticity mainly depends on the two factors of export earnings and profit margins.

According to Chinese customs statistics, in 1~6 month of 2015, China completed the total export of clothing and clothing accessories $76 billion 208 million, the number of garment exports was 14 billion 258 million, and the average univalent of garment exports was 4.31 dollars per piece.

If the depreciation rate of RMB to us dollar is 0.1%, 14 billion 258 million garments export products will earn more than 6 billion 100 million yuan at most.

Insiders estimate that the sale profit margin of the textile and garment industry will rise by 2%~6% per devaluation of 1%.

According to the Research Report of Everbright Securities, if the RMB continues to depreciate against the US dollar, the profitability of the textile and garment industry will be improved because of its relatively high export proportion. This will not only help enterprises reduce costs, increase export competitiveness of products, but also help enterprises gain foreign exchange gains and losses.

Companies benefit differently.

Among A share listed companies, there are many examples of targeting overseas markets and export businesses.

For example, the 2014 annual report of Rebecca shows that its revenue in the Americas market accounts for 35% of the total business revenue of the company.

Zhejiang Yongqiang mainly produces outdoor leisure furniture, sun umbrellas, tents and other products, and has the right of self import and export. Its sales revenue in North America accounts for 37% of the total business revenue of the company.

At present, 90% of our main products are sold to the US market.

One of ODM and OBM manufacturers, the continued depreciation of the renminbi will help increase sales and profit growth.

Our company is mainly engaged in the production, sales and related import and export business of middle and high class men's suits and women's fashion clothes.

In the export business, Dayang was founded by CK, GUCCI, BURBERRY, GiorgioArmani and other international top brands. The annual export of Western-style clothes was 6 million pieces (sets), ranking first in China.

Pan Lixiang, Secretary of Dayang creation board, said, "the export orders of the company are set up and the orders are stable. At present, the export revenue accounts for about 72%, so the exchange rate change has a great impact on the company."

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Suzhou Li Mei no Fashion Co., Ltd.

Category, products sold to Japan and Europe, the company's general manager Zhao Rui said, "in the short term, the devaluation of RMB has a significant impact on exports, which may encourage enterprises to increase investment in foreign trade, and the market competition in the future will be more intense."

Huang Renjie, an associate research fellow at the International Economic Research Institute of University of International Business and Economics, also said: "at present, most enterprises take immediate settlement of foreign exchange in order to avoid possible exchange rate risks, and the effect is relatively obvious.

In addition, some enterprises take this opportunity to increase their export business, and the employment and consumption that they are driving behind are, in a sense, promoting domestic demand.

However, the positive impact of RMB depreciation will also be different due to the specific circumstances of enterprises.

For example, those enterprises that have imported raw materials or equipment and other related costs will depreciate the value of their imports, offset the increase in income caused by partial devaluation of the renminbi.

On the other hand, enterprises will take corresponding measures to avoid exchange rate risk, and the benefit of RMB depreciation will also be affected.

Moreover, from the historical trend of the intermediate price of the RMB to the US dollar and the actual situation of textile and clothing exports, although the RMB exchange rate movements are related to the export situation, the feedback obtained is usually slightly lagged behind.

Regarding this, Chen Min, general manager of Jinjiang AI Lai Garments Co., Ltd. said, "the influence of RMB depreciation on the company is not easy to say now.

Our orders for the second half of this year have basically been fixed, and the fastest rate of exchange rate fluctuations will not be until next year.

The relevant person in charge of a domestic listed export garment company also said that the depreciation of the RMB would be good for the company at the macro level, but this effect is lagging behind, and it can not be immediately judged from the data.

Exchange rate pulling is not the master key.

Since 2010, the high cost dilemma of China's textile and garment industry has been increasing.

In 2010~2014, the export volume of China's textile and clothing increased by an average of 12.6%, while Vietnam's textile and clothing exports grew by an average of 18.3% over the same period. The continuous rise of domestic costs weakened the international competitiveness of enterprises.

There is a view that with the expected increase in export tax rebate rate and the continued depreciation of RMB depreciation, the high cost factor that has been running downward periodically since 2010 is expected to start reversing this year.

However, judging from the recently published semi annual report of the listed companies of textile and garment sector, the textile and garment enterprises whose export business is dominated by the export business in the first half of the year is not ideal.

Affected by weak economic recovery, factors of exchange rate fluctuations and international pfer of orders, China's textile and clothing decreased significantly in traditional markets. In 2015 1~6, the total value of exports to the traditional markets of the European Union, the United States, Japan and China Hongkong totaled 43 billion 919 million US dollars, down 6.22% from the same period last year.

Moreover, for emerging markets, there has been a marked decline in export orders for ASEAN and Russia over the same period, except Brazil and Mexico.

The depreciation of RMB is indeed beneficial to export, but whether garment enterprises increase export business depends on the needs of overseas customers in the final analysis.

"Ai Lai clothing's foreign trade business is mainly for the European market, while the euro continues to depreciate. Recently, the import volume of European customers has also been shrinking."

Chen Min believes that such a market environment, the positive role of exchange rate fluctuations will eventually be limited.

In short, exchange rate pulling is not the master key.

In the final analysis, China's textile and clothing products still need to increase the added value of products.

After the financial crisis, the global total demand expansion slowed down, and the "trade barriers" of the developed countries in Europe and the United States escalated. Under this constraint, although the devaluation of the RMB can alleviate the export pressure to a certain extent, the positive benefits it brings is probably negligible.