The RMB Exchange Rate "Broke 7", Why Is The Textile Market Uproar?

　　 In early August 5th, when the offshore RMB exchange rate dropped to 7 against the US dollar, the offshore RMB exchange rate against the US dollar also broke 7 after opening. The market has broken 7 on both shore and offshore. Many people's reaction is "sudden" and "finally broken". The reaction of the central bank to the market is also known as "amazing speed". It is only about an hour after the RMB exchange rate is on the shore, and it responds to the exchange rate breaking 7.

Many people in the industry were surprised by the news, and there was an uproar inside and outside the industry.

This year, the RMB has obviously depreciated this year, and the export competitiveness of the entire textile industry is expected to be enhanced under the stimulation of devaluation. Insiders say that the textile industry has a high degree of dependence on exports. The devaluation of the RMB will help the company reduce costs and enhance the competitiveness of its products, so that enterprises can get more orders. On the other hand, it is beneficial for export oriented enterprises to obtain foreign exchange earnings, which will further stimulate consumption and benefit the export of textile products. At present, half of the textile listed companies in the A share market account for more than 50% of the total export business. According to industry related calculations, the textile and garment industry has benefited from the depreciation of the RMB, and the depreciation of RMB by 1% can raise net profit by 2%-6%.

The expectation of devaluation of the renminbi is heating up again, and export oriented footwear and footwear stocks rose sharply in the morning. The textile and garment sector rose rapidly during the 5 day, while the shares of China Textile and Sino submarine shares were closed. The Eastern Jin Yu rose more than 8%, while the old Feng Xiang, Ai Dier and Xingye technology rose 5%.

Among them, the leading shares are Huafang shares and Sino submarine textiles trading, and Jiaxin silk and phoenix bamboo textile products have increased by more than 4%.

The origin of RMB exchange rate breaking 7

The main reason for the 7 breaking of the RMB exchange rate against the US dollar is that Trump, the US president, announced last week that it will have another $300 billion in September 1st to raise taxes on Chinese products by 10%. This is a clear violation of market expectations.

Reuters reported:

"In less than an hour after the exchange rate of RMB against the US dollar broke 7 in the onshore, the Central Bank of China issued a question answering on the website, which means that the central bank has prepared for breaking 7. At this time, the RMB exchange rate is 7, which is what the central bank intends to do. Zhang Ming said.

"(future) if the US side continues to upgrade the trade frictions, it will not exclude China from helping the exporters to hedge against tax pressure by allowing the renminbi to depreciate against the US dollar under market pressure."

In fact, 7 and 6.9 or 7.1, from the exchange rate, there is not much difference, the difference between them, the most important thing is a psychological price and market behavior.

The twenty-first Century economic report: "we did not expect to fall suddenly. We thought we had talked about it almost, and increased the proportion of forward lock in to RMB, but we did not expect to break 7."

The head of a textile export enterprise in Zhejiang said, "in the past, when the exchange rate fell, it might encounter customer pressure, but since last year, it has gone through a very special period. The price reduction is still relatively small. The fall in the exchange rate is indeed conducive to the thickening of the financial profits of the export enterprises, especially the textile industry which is more sensitive to the price."

Export enterprises are breathing, and enterprises such as textiles and garments are benefiting.

For those engaged in traditional foreign trade or cross-border electricity providers, the rise or fall of the renminbi will be related to their immediate interests.

Export enterprises generally settle in US dollars, and the renminbi depreciates. That is, one dollar can exchange more Renminbi and can buy more Chinese goods. Under this background, Chinese exporters can further enhance their international competitiveness and get more overseas orders.

In particular, textile, clothing and other price sensitive labor intensive enterprises are constrained by factors such as raw materials and manpower costs. These factories are becoming increasingly thin and difficult to survive. The renminbi will depreciate and these enterprises will get a breathing space.

In addition, foreign exchange earnings can be obtained for enterprises or individuals with dollar in hand.

However, the industry pointed out that, in addition to the completion of delivery, the process of settlement, and did not take a fixed exchange rate orders, because of the two days' slump, "cheap", other orders can not immediately get additional profits, and some export companies even because they did not take advantage of the psychological imbalance, after all, the early order locked foreign orders will not be affected by the rise and fall of the renminbi, and there is no way to enjoy the benefits of sudden devaluation.

In general, the depreciation of RMB is good for export enterprises.

However, "breaking 7" is still a mystery.

Frequent fluctuations in the future may make it harder for some SMEs to do business.

The impact of RMB value change on foreign trade is multifaceted, and labor-intensive and instant settlement enterprises may benefit relatively.

As we all know, the weakening of the RMB exchange rate will promote the export of our country, and increase the exchange earnings of relevant enterprises, especially those with high proportion of export-oriented businesses. Among them, textile and clothing will benefit most.

If the depreciation of the RMB against the US dollar persists, the profitability of the textile manufacturing industry will undoubtedly increase because of the higher export proportion. On the one hand, it will help enterprises to reduce costs and improve the export competitiveness of their products; on the other hand, it will help enterprises to gain exchange gains and losses.

In addition to the immediate settlement of foreign exchange, another part of the enterprises choose to make long-term settlement, and advance the exchange rate with the banks in advance, so as to avoid the risk of RMB exchange rate fluctuations. However, if future exchange rate fluctuations are uncertain, enterprises may suffer losses.

The industry believes that due to the increase in labor, raw materials and capital costs, the good exchange rate can not offset the rising cost of domestic clothing and textile industry, far exceeding the negative impact brought by the comprehensive cost of Southeast Asia and Africa. However, it needs to be clear that fluctuations in the RMB exchange rate may make some small and medium enterprises more difficult to do business, and for enterprises, they still want to maintain stability, because the lock rate is not what ordinary entrepreneurs can control.

In fact, the depreciation of the RMB will also have a significant impact on imports, resulting in imported inflation. At present, China relies on imports in the commodities such as oil and agricultural products, and if it really depreciates, it will lead to a rise in the price of domestic staple textile products. For small and medium-sized textile enterprises, raw materials are all dependent on imports. The rising prices of raw materials will lead to a rise in production costs, which will make it more difficult for small and medium-sized enterprises to survive.

RMB exchange rate "breaking 7"

Why did it cause an uproar in the textile market?

01, the profit of the exchange will be returned.

02 or will hedge 300 billion of China's exports to the United States 10% tariff.

03 or will drive the foreign trade market in the second half of the year.

But at the same time, the decline of the RMB exchange rate will also bring negative side to the textile enterprises.

01 the price of imported raw materials will be under pressure.

02 as mentioned above, the risk of exchange rate volatility is increasing.

The trend of RMB exchange rate after "breaking 7"

In August 5th, the head of the people's Bank of China made a series of responses to the trend of "breaking 7" of the RMB exchange rate, which is as follows:

Influenced by unilateralism and protectionist measures and the expectation of China's tariff increases, the RMB exchange rate has depreciated against the US dollar today, breaking through 7 yuan, but the renminbi continues to maintain stability and strength against a basket of currencies. This is a reflection of market supply and demand and international exchange market volatility.

China implements a regulated floating exchange rate system based on market supply and demand and reference to a basket of currencies. Market demand and supply play a decisive role in the formation of exchange rate. The fluctuation of RMB exchange rate is determined by this mechanism, which is the proper meaning of floating exchange rate system. From the perspective of global market, it is observed that the exchange rate fluctuation is also normal as the price ratio between currencies is fluctuant. The price mechanism can play the role of resource allocation and automatic adjustment.

If we look back on the change of RMB exchange rate over the past 20 years, we will find that when the RMB has more than 8 yuan against the US dollar, there are more than 7 yuan and 6 yuan, and now the RMB exchange rate is back to more than 7 yuan. What needs to be explained is that the RMB exchange rate is "breaking 7". This "7" is not the age. In the past, it could not come back, nor was it a dyke. Once it was washed away, the flood would be a great drain. "7" is more like the water level of the reservoir. When the flood season is higher, it will drop down and rise and fall when the dry season is over.

In addition, Li Liuyang, chief foreign exchange analyst at China Merchants Bank, said that considering the possibility that the US Federal Reserve would cut interest rates again during the year, the bounce of the US dollar index would be limited. The RMB exchange rate will be strengthened once the Fed expects to cut interest rates again at the end of the year.

It is more likely that the RMB exchange rate will rise at a later stage and tend to be stable. For textile enterprises, the stability of exchange rate is the most favorable side. Whether it is quoted or settled, stable exchange rate will not cause losses to enterprises. From a macro perspective, the exchange rate is stable, and the overall economic situation is good. It also plays a stabilizing role in the economy of the industry. The order situation of the enterprises will not encounter too many variables.

So what should textile enterprises do?

Avoiding risks caused by exchange rate fluctuations?

First, exchange rate risk should be included in cost control.

Two, trade finance

Three, use of financial derivatives

Four. Use RMB to calculate and settle accounts.

Five. Import and export hedging

Six, enhance exchange rate risk management skills.

Textile market intensified by Sino US trade disputes:

Face the future with common sense!

In recent years, Trump has gone back on his own feet again. The possibility of increasing tariffs or expanding to almost all Chinese imports has further increased the uncertainty of China's efforts to manage the RMB exchange rate. At the same time, the weakening of the renminbi will reduce the cost of buying Chinese goods by American buyers and help offset the adverse effects of US tariffs.

No matter how the external wind and cloud change, the most important thing for Chinese textile industry is to do well in their own affairs, constantly deepen reform, open wider to the outside world, improve their technological level, improve the quality of products, make long-term plans, maintain stable production and management, and face the future changes with a calm mind.

Only when we are strong and strong enough, can we make more powerful voices in the face of external threats.