RMB To Us Dollar Exchange Rate "Breaking 7" Will Benefit Textile And Garment Industry

[generally speaking, the depreciation rate of RMB will be 1%, and the sales profit margin of textile and garment industry will increase by 2% to 6%. ]

In August 5th, offshore RMB against both the US dollar and the onshore RMB against the US dollar broke 7. What will be the impact of RMB exchange rate fluctuations on textile and clothing industries that are more sensitive to exchange rate?

Textile and garment industry will benefit

The devaluation of the RMB will make the textile and garment enterprises with better export value. The situation in China's textile and apparel industry is grim due to the appreciation of the renminbi, the contraction of exports and the rising cost of raw materials and manpower.

Statistics from China Customs show that in June 2019, China's textile and clothing exports amounted to 24 billion 647 million US dollars, an increase of 3.42% compared to the same period, a decrease of 3.26% over the same period last year. Among them, exports of textiles (including textiles, yarns, fabrics and articles) amounted to $10 billion 309 million 200 thousand, a decrease of 3.51% compared to the same period last year, and exports of clothing (including clothing and accessories) were 14 billion 337 million 300 thousand US dollars, down 3.08% from the same period last year.

In 2019 1~6, the total export volume of China's textiles and clothing was 124 billion 231 million US dollars, down 2.37% compared with the same period last year, of which the total export volume of textiles was 58 billion 619 million 700 thousand US dollars, up 0.66% compared to the same period last year. The total export volume of garments was 65 billion 611 million 300 thousand US dollars, down 4.93% from the same period last year.

For many textile and garment enterprises that are devoured by foreign exchange links, depreciation of the renminbi will be one of the most direct factors to stimulate their growth. As a general rule, the sales profit margin of the textile and garment industry will increase by 2% to 6% after the depreciation of RMB by 1%.

The textile industry's overseas income accounts for a relatively high proportion of enterprises. Wei Qiao textile (2698.HK), China's largest cotton textile manufacturer, has experienced 500 consecutive years of decline in the world's top 88 ranking, and this year it slipped 88 to 273. Its domestic and foreign sales account for a similar proportion. The exchange rate change will benefit its overseas earnings growth.

And 600448.SH, such as main cotton, chemical fiber textile and dyeing and finishing, cotton and chemical fiber products, clothing and apparel production, processing and marketing, its overseas revenue accounted for 84.16% of total revenue in 2018. 600250.SH, the main import and export trade and domestic bulk trade, accounts for 42.8% of its business in Europe and America. 002486.SZ, whose textile industry is the main business, showed its export revenue of 341 million yuan in 2018, accounting for 86% of its total revenue. 600156.SH, the main ramie and bamboo fiber textile, accounts for more than 80% of export revenue. There are also medium and high grade garment markets, and export business accounts for 70% to 80% of 600493.SH.

In the clothing category, it has a modern 002656.SZ for men's clothing, and overseas income accounts for 56.50% of total revenue in 2018. In June of this year, the prospectus was submitted, with the intelligent customization and C2M mode as the main selling point of the clothing enterprise, cool special intelligence. Its star business accounted for less than 10% of the revenue contribution. The source of income still relies on the OEM for overseas clothing brand. In recent years, overseas income accounts for 70% of the total. The exchange rate fluctuation will also make the company continue to lose profits.