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What Is The Impact Of RMB Appreciation On Textile Industry?

2020/11/25 17:10:00 0

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Recently, the RMB ushered in another wave of upward trend! Both the offshore RMB exchange rate and the middle rate of RMB against the US dollar have reached a new high since June 2018.

Why does RMB rise?

1. Epidemic situation

The new outbreak spread all over the world, many countries suffered a great blow, the global financial turmoil and recession, because of the lack of strict prevention and control measures in many countries, led to the outbreak of the second epidemic. However, under strict epidemic prevention measures, China has basically controlled the epidemic situation, and its economy has begun to recover. This is the first mover advantage in the economic fundamentals of the post epidemic era. This is a strong expectation for capital.

2. America

Under the outbreak of the epidemic in the United States, the economy has been seriously hit. The US Federal Reserve has made it clear that it will abandon the US dollar, protect US stocks, and then start to adopt zero interest rate and unlimited quantitative easing policy, which will lead to a flood of US dollar liquidity, and the market expects that the easing time will last for a long time. Adding two outbreaks further weakened the dollar.

3. RMB policy

The RMB policy is a floating exchange rate mechanism which is controlled and managed by the senior management.

4. National debt

As many countries in the world entered the era of zero interest rate, China's monetary policy began to tighten, which led to the spread of interest rates on treasury bonds. The yield of ten-year Treasury bonds has always represented the tightness of money pipes. Since May, the central bank began to tighten the water supply, the money became more expensive, the yield of treasury bonds began to rise significantly, the debt interest spread between China and the United States rapidly widened, and the short-term capital inflow promoted the appreciation of RMB against the US dollar. The most obvious is to see if your yu'ebao income has changed.

5.RCEP

A few days ago, the signing of the regional comprehensive economic partnership agreement (RCEP) has added fuel and fire to the appreciation of RMB. ?

What is the impact of RMB appreciation on textile enterprises?

Exchange rate fluctuation is a long-term market risk faced by foreign trade enterprises, but the recent rapid appreciation of RMB has caught some enterprises off guard. In contrast, the appreciation of RMB to around 6.5 makes small and medium-sized textile enterprises facing great challenges. These labor-intensive products will not compete in price due to the appreciation of RMB exchange rate, but some Southeast Asian countries can not.

Ye Jinfeng, head of an enterprise that mainly produces tablecloths, shower curtains and other products, told reporters that the fluctuation of RMB exchange rate has a great impact on enterprises. "Mainly reflected in the price rise, less orders, less profits.". He added that SMEs do not have any hedging plans and can only digest exchange rate differences on their own.

The reduction of orders and the loss of foreign exchange settlement are the common challenges faced by these foreign trade enterprises. When some enterprises receive foreign payment for foreign exchange settlement, due to the rise of exchange rate, the RMB actually received is greatly reduced, which directly affects the enterprise benefit and even leads to enterprise loss. Ms. Liang told reporters, "in order to avoid this risk, we have to lock foreign exchange, that is, in the case of frequent fluctuations in the exchange rate, let the bank handle the operation of locking the exchange rate for enterprises.".

The appreciation of the RMB exchange rate is obviously affected by some enterprises. The staff of a yarn foreign trade enterprise admitted that their prices were usually pushed to a very low level by customers due to the requirements of competition. When enterprises encounter the loss of RMB exchange rate, coupled with the rise of raw materials and shipping freight, the operating pressure of enterprises will increase greatly.

Tan Yaling, the chief economist of the Chinese Academy of foreign exchange, said that the ability of Chinese state-owned enterprises to withstand the risk of foreign investment is relatively weak compared with that of foreign-funded enterprises. The rapid appreciation of RMB exchange rate has indeed brought great challenges to these private enterprises. "If an enterprise earns back 1 million US dollars, it can get back 7 million yuan when the RMB exchange rate is 7, but now it can only get back 6.5 million yuan. The profit margin of these enterprises is very low. The rise of RMB exchange rate will suddenly exceed their cost line, and even form a survival challenge for these enterprises.

However, due to the impact of the epidemic, the external demand slows down and the appreciation of RMB will lead to the increase of export product cost, which will affect the international market competitiveness of export enterprises' products. At the same time, there will also be exchange rate risk, which may lead to exchange loss. Therefore, export enterprises should take measures to prevent and avoid exchange rate risk.

According to experts' analysis, the strength of the RMB exchange rate may continue, but considering the possible risks in the future, including global risk aversion, Sino US relations and asymmetric capital control, the RMB exchange rate may show an appreciation trend of slowing slope, and the short-term RMB exchange rate range may be 6.7-6.8. The continuous appreciation of the exchange rate may have a certain impact on China's export and manufacturing industry.

"We should increase policy support for export-oriented enterprises and increase financial, financial and export tax rebates." Wen bin suggested. ?

Will RMB continue to rise in the future?

This information is crucial to how the RMB will go in the future, and there are also differences in the judgment of market analysts. ? ? ? ? ?

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For example, Cheng Shi, chief economist of ICBC international, believes that the force to keep the RMB stable will continue in 2021.

However, Li Chao, chief economist of Zheshang securities, believes that from the forward and option related indicators of foreign exchange market that can reflect exchange rate expectations, exchange rate expectations remain generally stable, and there is no very obvious unilateral expectation. Therefore, the probability of RMB exchange rate appreciation overshoot is small.

Although it is difficult to predict the future trend of RMB, it is certain that there is no currency that only falls but does not rise or only rises but does not fall.

A spokesman for the safe also said that smart markets can always see both sides of the coin. They not only fully recognize the basic support of the domestic economy to the RMB exchange rate, but also pay close attention to various external unstable and uncertain factors, which may keep the RMB up and down and fluctuate in both directions.