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RMB Exchange Rate Soars, Entering The Era Of 6.5! Textile Man: Originally There Was No Profit, But Now It Is More Difficult. This Foreign Trade Can'T Be Done?!

2020/11/21 9:28:00 22

Exchange Rate

Recently, the sharp rise of RMB exchange rate has aroused the close attention of textile workers.

The people's Bank of China authorized the China foreign exchange trading center to announce that on November 17, 2020, the middle rate of RMB exchange rate in the inter-bank foreign exchange market was: 1 US dollar against RMB 6.5762 yuan, an increase of 286 basis points over the previous trading day, to the era of 6.5 yuan. In addition, the onshore and offshore RMB exchange rates against the US dollar have risen to 6.5 yuan era. ‍



From June this year, the exchange rate of RMB against the US dollar began to rise continuously. Overall, the offshore RMB exchange rate has risen by about 6% against the US dollar this year, and the onshore RMB exchange rate against the US dollar has also reached a new high since late June 2018 for two consecutive days.


The rise in the RMB exchange rate is due to the first recovery of China's economy. Under the circumstances of the epidemic situation in China, the rapid recovery of epidemic situation has become a key point for the rapid recovery of global economic order. This is an urgent need for Chinese investment channels. In addition, the signing of RCEP also raised the market's expectation of the Chinese market by another level, thus boosting the appreciation of the RMB. And with the steady development of China's economy, the RMB exchange rate may continue to rise in the future. ‍



Although in the long run, the appreciation of RMB is due to the optimistic view on China's economy, which is a favorable situation, but in the short term, it does pose greater challenges to textile foreign trade enterprises.


Take a textile foreign trade order of US $100000 as an example, when the exchange rate is 7.1, the foreign exchange can be settled at 710000 yuan, while when the exchange rate changes to 6.54, the foreign exchange settlement becomes 654000 yuan, and the difference between them reaches 56000 yuan.



After the exchange rate fluctuates, it is also very difficult to discuss price adjustment with foreign investors.



A cloth boss who does textile foreign trade business said that now foreigners are becoming more and more smart. Now China's textile production capacity is overall surplus. Therefore, in foreign trade negotiations, foreign buyers take the initiative. When the RMB devalues, he will ask to change the purchase price as soon as the exchange rate fluctuates. However, as soon as the appreciation is made, it is not in a hurry to adjust the price. Finally, the textile enterprises are injured Industry. Under the influence of the epidemic situation, the demand for foreign trade has shrunk sharply, the market competition has become more intense, and the bargaining power of enterprises has become lower.




Low profit operation of textile enterprises



On the other hand, due to the continuous shrinking of terminal demand caused by the epidemic situation, textile industry chains are under greater inventory pressure than in the past.


In terms of weaving inventory, the average inventory of weaving enterprises in Jiangsu and Zhejiang has exceeded 40 days, about 5 days higher than that of the same period last year.


In terms of polyester inventory, from the statistical data of China silk capital network, the overall inventory of polyester market is now concentrated in 24-36 days; in terms of specific products, POY inventory is up to 7-14 days, FDY inventory is around 18-33 days, and DTY inventory is about 26-36 days.


Under the pressure of high inventory, textile enterprises regard inventory clearing and capital revitalization as the top priority, while profit is secondary. Therefore, there are almost no profits or even losses in some market goods in the textile market. Although the order goods have a certain profit, the overall profit situation is not good.


Boss youbu said frankly that if there were 10 million funds in the company's account at the end of last year and 10 million at the end of this year, although this year's work is in vain, this result has surpassed most of the enterprises in the market.


In such an environment, a little fluctuation of the exchange rate may change a foreign trade order from a profit to a loss.



Whether the settlement of foreign exchange becomes a correction point



According to the past experience, in the face of exchange rate fluctuations, textile foreign trade enterprises will generally choose to put their money aside, postpone the time of settlement of foreign exchange, and wait for the RMB exchange rate to be low before settlement. But such an idea may not be able to cope with the current round of exchange rate volatility


On the one hand, compared with other countries in the world, China's economic performance under the epidemic situation will only be more and more brilliant, and the RMB exchange rate will continue to improve in the future; on the other hand, the end of the year is coming, and enterprises are most lack of funds at the end of each year, so the settlement of payments, wages and other things need cash, and the time for settlement of foreign exchange will not be delayed for too long. Therefore, the settlement of foreign exchange has become a very difficult point for enterprises.


But the appreciation of the RMB exchange rate is not only bad, not good.



Imported raw materials

Some textile materials such as cotton and wool and high-end differentiated fibers are still partially imported from abroad. The appreciation of RMB can effectively reduce the cost of this part.

Imported looms

In recent years, the textile industry is in full swing of transformation and upgrading, and many textile enterprises choose to import looms. If there is such a plan, with the signing of RCEP and the appreciation of RMB exchange rate, the cost of each imported water jet loom can be converted into RMB and tens of thousands of yuan can be saved.

Economic environment

The most important thing is that the appreciation of RMB itself represents the global capital's optimistic attitude towards China's economy. The textile industry has never been an independent industry. China's economy is good, the domestic demand will continue to expand, at the same time, the development of the technical level of the textile industry will be faster and faster, enterprises can take advantage of this east wind, to the production of higher value-added fabrics on the road.




After RCEP was signed, because the market is optimistic about China's market, the RMB exchange rate has been rising all the way, which has caused great trouble to textile enterprises in low profit state in the short term. But in the long run, this is the inevitable result of China's economic recovery, which has a huge role in promoting the transformation and upgrading of the textile industry.





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