The US Dollar Is Approaching 7.2 Against The Yuan. What Is The Impact On The Textile Industry?

Sino US trade war continues to heat up

In August 15th, the US government announced a 10% tariff on the rest of China's imports of about $300 billion, and two batches were implemented in September 1, 2019 and December 15th.

In August 22nd, the Chinese government adopted counteracting measures to declare tariffs of 10% or 5% on imports of 75 billion dollars worth of goods originating in the United States. The two batches were implemented in September 1, 2019 and December 15th.

In August 23rd, the US side announced that it would raise tariffs on Chinese exports to the United States totaling 550 billion US dollars. China firmly opposes this.

Continued depreciation of RMB

Along with the escalation of Sino US trade disputes, since the "break 7", the exchange rate of the RMB against the US dollar has continued to fall, which has aroused great concern in the global market.

In August 26th, the offshore RMB exchange rate against the US dollar opened at 7.1751, which was nearly 400 points lower than the closing price of 7.1355 on the previous day, and then the offshore RMB exchange rate against the US dollar once depreciated to 7.1835 and then rebounded, and the period approached infinitely to 7.2.

See how experts analyze

At present, Zhao Qingming, vice president of the China Financial Futures Exchange Research Institute, analyzed: "the renminbi has fallen, first of all, the US dollar has strengthened; on the other hand, the escalation of trade frictions has made the foreign exchange market and financial market more pessimistic, but this pessimism is short term; on the other hand, as the price of a transaction, the exchange rate fluctuation is normal, and it is bound to fall when it becomes empty. When it sees more, it will rise, and there will be a trend of rise and fall.

At present, the RMB exchange rate does not have the basis of a substantial depreciation.

However, trade frictions intensified further. The dollar index strengthened further in the morning. The US dollar rose to more than 300 points against the yuan, the highest to 7.18345, which could further test the 7.2.

Reuters reported that trade frictions between China and the US have escalated again. Reuters quoted the view of UBS Securities that China's decision was not surprising, after which China had warned many times that it would take the necessary counter measures. Compared with the United States, China's counteraction measures were relatively mild. Now that trade frictions are heating up again, it is now estimated that the exchange rate of RMB against the US dollar at the end of 2019 will be 7.3 in 7.22020 years.

It is not clear what factors or opportunities will prompt the us to stop escalating trade frictions and conclude trade agreements with China.

What is the impact on the textile industry?

For practitioners of textile and garment trade circles, the rise or fall of the renminbi will be related to their immediate interests. Orders for textile and garment export enterprises in China are generally settled in US dollars, and RMB depreciates, that is, 1 US dollars can be exchanged for more RMB. Especially in the context of Sino US trade war, the devaluation of the RMB exchange rate has contributed to the financial efficiency of export enterprises to a certain extent, easing the pressure of the expected increase in export tariffs.

Although some enterprises enjoy the direct benefits brought by the recent exchange rate fluctuations, for most enterprises, the positive effect of "breaking 7" is not as big as expected. "Devaluation is good for export enterprises, and the settlement of accounts payable will increase profits. But the goods sold now may not increase profits, because the accounts will be returned in about two months. At that time, the RMB exchange rate is hard to say. A foreign trade company official said, "in addition, taking into account the cost of imported raw materials, buyers bargaining and other factors, a drop or a rise, the final profit may be flat."

The head of a textile company said that the RMB exchange rate broke 7, which is good for the overall foreign trade situation, and the more impact on the industry is to restore the current anxiety. He believes that on the one hand, foreign businessmen themselves are very smart. In the face of the depreciation of the renminbi, they naturally have "psychological number" when making quotations, and will adjust their quotations accordingly. On the other hand, although depreciation will give Chinese products more advantages in the international market than before, competition among domestic counterparts is still fierce. Therefore, he believes that the impact of devaluation on the textile industry is relatively limited.