What Does Interest Rate Cut Bring To Cotton Enterprises?

Data released by the national interbank lending center on 20 may show a 1 year LPR of 3.85%, a 20 basis point cut from last month, 4.65% LPR over the 5 year period, and 10 basis points lower than last month. This is the largest interest rate cut by the central bank in 2020. It is also the longest "single interest rate cut" in the history of China.

The meeting of the Political Bureau of the Central Committee of the CPC recently pointed out that prudent monetary policy should be more flexible and moderate, so as to maintain a reasonable and abundant liquidity and reduce the interest rate of the loan market by using the means of lowering interest rates, reducing interest rates and refinancing. Some cotton textile enterprises, cotton traders and investors believe that the interest rate cut is manifested in the following aspects:

First, with the implementation of the policy, the financial pressure and financing cost of some cotton enterprises will be effectively alleviated, which will play a key role in stabilizing and even rebound the whole industry. Affected by the new crown epidemic situation, China's cotton textile industry is facing a series of difficulties, such as half stagnation in production and marketing, tight cash flow, and so on. It needs the government to continue to support all aspects of policies, taxes and funds. In the end of May, part of the cotton enterprises in the territory were facing the pressure of centralized repayment of loans and financing. The interest rate cut gave enterprises courage and confidence to tide over difficulties.

Two, the central bank's interest rate cut has increased significantly. Cotton companies and investors are looking forward to a more proactive and effective fiscal policy in the future. The Political Bureau meeting held in April 17th put forward that we should continue to use the means of lowering interest rates, reducing interest rates and refinancing, so as to ensure that liquidity is reasonable and abundant, and guide lending market interest rates down. Industry analysis, after today's LPR sharply cut interest rates, this year estimated that there will be about 30 points of interest rate cuts.

Three, interest rate cuts will effectively stimulate the domestic demand market and weaken the impact of the sharp decline in foreign trade export orders on the entire spun apparel industry. With the outbreak of the new crown pneumonia in Japan, Korea, Europe and the United States, the order of Chinese enterprises has been largely cancelled or postponed. The pressure has been forced from the terminal foreign trade companies and garment enterprises to weaving, cotton mills and cotton enterprises. At present, Guangdong, Jiangsu and Zhejiang, Shandong and other textile and garment enterprises have shifted their sales focus to the fiercely competitive domestic market.