The Current Situation Of Textile Industry Under The Influence Of RMB / US Dollar Exchange Rate Reaching A New Low Of Two Years

The continued rise of the US dollar index puts pressure on the exchange rate of non US currencies. The onshore and offshore RMB exchange rates against the US dollar fell one after another, hitting a new low since August 2020.

According to the exchange rate between RMB and US $895, the exchange rate of RMB was reduced by 98.6 basis points compared with that of RMB exchange rate adjusted by China Central Bank.

"At present, the global foreign exchange market is characterized by a strong US dollar and a weak non US dollar currency. As a non US dollar currency, RMB is also affected to a certain extent." Zhao Qingming, vice president of the China Academy of foreign exchange investment, said.

Wang Youxin, a senior researcher at the Bank of China Research Institute, believes that the central bank has recently lowered the medium-term lending facility and the quoted interest rate (LPR) in the loan market. As a result, the trend of monetary policy between China and the United States continues to diverge, which has also brought some disturbance to the short-term cross-border capital flow and exchange rate.

Yang Delong, chief economist of Qianhai open source fund, said that from the economic point of view, China's economy has been affected by factors beyond expectations this year, and the economic growth rate has seen a significant correction, which has also formed a certain impact on the trend of RMB. However, the economic recovery in the second half of the year was relatively weak. For two consecutive months in July and August, the PMI returned below the 50% divide between prosperity and failure, and only in June it returned to more than 50%. This shows that the foundation of economic recovery is still weak and should not be taken lightly. RMB devaluation has a certain impact on China's import and export trade. Generally speaking, RMB depreciation will be beneficial to export trade, but if the depreciation rate is large, it may affect the confidence of overseas investors. From the macro-economic point of view, the current economy is in the stage of slow recovery after the bottom. Although the recovery is not strong, the trend of recovery has gradually formed.

As a big textile export country, what is the impact of RMB devaluation on textile enterprises?

Home textile leading enterprise vosge shares a few days ago in response to investors asked that the depreciation of the RMB is conducive to the company's exports. Jiangsu Guotai, which focuses on the import and export trade of clothing and knitting, also said that the company pays close attention to the changes of international market environment and exchange rate, and the moderate depreciation of RMB is conducive to the company's foreign trade export business.

In the short run, the fluctuation of the exchange rate has brought certain benefits to foreign trade enterprises. Some foreign traders have also adjusted the exchange rate locking and pricing to enhance their competitiveness in the severe foreign trade situation.

"I thought I would be sawing around 6.8 for a period of time, but I didn't expect to break through 6.9 so soon." Meng Zhuo, manager of a clothing foreign trade enterprise in Anhui Province, said that due to the obvious recent decline of the RMB exchange rate, they have decided to suspend the operation of locking the exchange rate for all orders at the end of this year.

As always in the front-line sales director, Meng Zhuo said frankly, from the current domestic and foreign markets, the foreign trade situation will not be too optimistic. After suspending the foreign exchange locking for the next orders of this year, they plan to lock the foreign exchange of orders of more than $500000 from March to April next year by 30% - 50%.

Zhao Benzhi, director of foreign trade business of Shanghai Puqi Textile Co., Ltd., said that due to the small business volume, the company did not do much to lock foreign exchange, mainly to follow the market, but will take into account the trend of exchange rate when quoting, so as to relax the relevant agreements.

It can be said that exchange rate fluctuation is expected for foreign trade enterprises and has become a "normalization" challenge faced by enterprises.

A foreign trade source in the textile industry said that the recent devaluation of the RMB against the US dollar has an overall impact on the production and operation of the textile industry in three aspects: for enterprises with a high proportion of export sales, enterprises with more US dollar assets will benefit; Enterprises that do not purchase high-quality raw materials completely in China and highly rely on imported raw materials, such as cotton, cotton yarn and equipment, will be negatively affected; For enterprises with us dollar foreign debt or long-term settlement of foreign exchange, it will have an impact on the expected earnings of enterprises. For some large enterprises, these three conditions coexist, and the specific enterprises are affected by different degrees.

Yu'an will see a significant increase in the value of Chinese products due to the depreciation of foreign consumers. For China's export enterprises, it may mean receiving more orders. Even if the number of orders received is the same as in previous years, the operating income of enterprises will also increase. This is one of the main reasons why China's textile export data is still performing well this year. Of course, the devaluation of the RMB has both advantages and disadvantages. For imported goods, it will cost more. Therefore, we can see that the number of imported cotton and cotton yarn has decreased in recent years, part of which is due to the rising cost caused by the depreciation of RMB.

Luo Yucheng, Deputy Secretary General of Jinjiang dyeing and finishing industry association, told reporters that the depreciation of RMB has a positive effect on export, but it is not appropriate to overestimate its impact. Since most enterprises have taken a series of measures to hedge exchange rate risk, such as import hedging, US dollar financing and forward foreign exchange transactions, the positive impact on performance should be analyzed in detail. He suggested that textile enterprises should pay close attention to the changes in the international market environment and exchange rate, so as to obtain more profits, and improve the ability to resist foreign exchange risks by reasonably optimizing the structure of foreign currency assets and liabilities.

Zhu Yuxing, head of the Information Department of China Textile Import and Export Chamber of Commerce, said that the current decline in the RMB exchange rate against the US dollar is mainly due to the short-term fluctuations caused by the rapid strengthening of the US dollar index, which does not form a strong expectation of depreciation. The short-term pressure on the RMB exchange rate will not change the long-term stable pattern. The reason why textile and garment export enterprises pay attention to "broken 7" is more because of the psychological integer gate.

Zhu Yuxing pointed out that although the devaluation of the local currency is conducive to exports, export textile enterprises still hope that the exchange rate fluctuation is within a stable range. The impact of RMB exchange rate fluctuation on export textile enterprises is mainly reflected in two aspects, one is the settlement of foreign exchange, the other is the price of raw materials. In terms of foreign exchange settlement, generally speaking, the lower the exchange rate, the more favorable it will be for export. However, if the exchange rate drops, overseas orders will also be depressed, and the collection time is uncertain. If the spot exchange rate at the time of collection fluctuates again, there will be a risk that the gain will not be worth the loss. In terms of raw material prices, the lower RMB exchange rate is not conducive to import, leading to the rise of import prices of cotton, chemical fiber and other raw materials used for production, which will drive up the production costs of export textile enterprises.

Zhu Yuxing said that after years of experience, export textile enterprises have gradually coped with the fluctuation of RMB exchange rate. Both large-scale export textile enterprises, small and medium-sized export textile enterprises have accumulated certain experience in avoiding trade-related exchange rate risk, and their exchange rate risk management ability has been continuously enhanced.

Zhu Yuxing said that it is not necessary to overemphasize the devaluation of the RMB exchange rate at present. If the RMB tends to depreciate excessively in the future, which will affect the national financial security, the central bank is bound to take measures to stabilize the exchange rate. In the long run, the moderate two-way fluctuation of RMB exchange rate is a normal phenomenon; Overall, the impact on export textile enterprises is controllable.

Although the current global economic and monetary policy situation is becoming more and more complex, experts generally say that the RMB is still obviously resilient.

Yang Delong said that the depreciation of the RMB exchange rate will be conducive to the recovery of import and export costs for enterprises. In the short term, the US dollar index continues to strengthen, and the RMB exchange rate may be under pressure. In the medium and long term, the real exchange rate of RMB has strong resilience, and it is not likely to fall sharply. In the long run, the economic fundamentals still support the RMB exchange rate. After the economic growth rate stabilizes and rebounds, the RMB may stabilize. Now, both the government and the market have greatly enhanced their tolerance and adaptability to the two-way fluctuation and wide range fluctuation of the exchange rate.

Analysis of China Merchants Securities pointed out that the U.S. dollar's approximate rate will continue to be strong until the end of the Fed's interest rate hike and the release of energy risk in Europe. The inflection point is expected to be from the end of this year to the beginning of next year. The chief economist of CITIC Securities clearly believes that the balance of payments will be in balance in 2022, and the RMB's approximate rate will still show a fluctuating trend.

In the 135 issue of economic and financial hot spot quick review of 2022, Wu Dan of the Research Institute of Bank of China analyzed that in the medium and long term, there is still strong support for the stable RMB exchange rate. First, the stable relationship between supply and demand of foreign exchange is the key support of RMB exchange rate. According to the data of settlement and sales of Foreign Exchange released by the State Administration of foreign exchange on August 15, China's current account surplus in July was 15.978 billion US dollars, which was significantly higher than that in June; The trade surplus of goods was US $30.692 billion, up 20.94% over June. The increasing current account surplus is conducive to partially offsetting the impact of short-term capital outflow and maintaining the overall stability of the supply-demand relationship in the foreign exchange market. Second, the RMB exchange settlement and sales are expected to be stable. From the perspective of market expectations, the Fed's hawkish interest rate hike has not had a significant impact on RMB foreign exchange demand. On August 29, the spot inquiry volume of USD / RMB was US $41.02 billion, 25.76% higher than the average value of US $32.617 billion so far this year, and the average volume of spot inquiry between USD and RMB in the whole August was also USD 40.193 billion. On the whole, with the support of various domestic policies, the momentum of domestic economic recovery in the second half of the year is still strong, the balance of payments is good, the scale of foreign exchange reserves is reasonable and sufficient, and the RMB exchange rate will fluctuate in a reasonable threshold range. Enterprises and the market should also hold the risk neutral concept, take the actual demand as the guidance, and actively seek reasonable hedging of foreign exchange derivatives.