RMB Appreciation Runs Daily With The Exchange Rate.

On the 12 day, when President Hu Jintao met with us president Obama in Washington, he stressed that the appreciation of the RMB can not solve the problem of trade imbalance between China and the United States, and the direction of China's reform of the RMB exchange rate formation mechanism is unwavering. When the news came, Mr. Huang, who was engaged in foreign trade business, breathed a sigh of relief. "This shows that the rapid appreciation of the renminbi will not happen any time soon." He said that if the renminbi appreciates, he will not only earn less money but also lose money.

RMB appreciation squeezes corporate profits

This year, the latest information on the RMB exchange rate online has become Mr. Huang's daily homework. As an old man who has been engaged in foreign trade for more than 10 years, he feels that business is becoming more and more difficult.

"The exchange rate is all right. In the first quarter of this year, the renminbi has appreciated by 2.78% against the US dollar." He said that every day the heart is hanging on the exchange rate fluctuation. For the foreign trade industry, the change of exchange rate is directly related to the export and order of products, and at the same time, it affects the profits of enterprises.

Mr. Huang said that the depreciation of the euro first forced the enterprises to take the US dollar settlement as far as possible in foreign trade. Now the United States is putting pressure on the renminbi to appreciate. If the yuan really appreciates rapidly, he may be dead this year.

Huang said, assuming that shoes are exported to the United States, one pair sells for 20 dollars, but the profits that belong to Chinese enterprises are only about 5%. That is to say, selling a pair of shoes, Chinese enterprises earn about six or seven yuan only. However, the price of raw materials such as cotton and cotton yarn has been rising steadily since the beginning of this year, and the fabric price has risen sharply, and the profit space has been compressed.

"Wages in Xiamen have also risen. In order to cope with the shortage of workers, enterprises have also raised wages for workers this year. Xu Mujie, chairman of Xiamen Wan Jie long, said that in this way, the profit margins of enterprises are lower.

Xu Mujie said that in April 13th, the RMB exchange rate between the US dollar and the US dollar was about 6.82. If the RMB continued to appreciate and the middle price reached 6.5 to 6.6, then there would be no profit at all.

"Therefore, the appreciation of RMB makes our business pressure very big." Xu Mujie said frankly, Vangelo also basically takes the domestic trade as the main factor, if it is the textile and garment enterprises which are mainly export oriented, the pressure is self-evident.

Every day is busy running against the exchange rate.

"Every day, we are busy running against the exchange rate and how to avoid the risk of RMB exchange rate." Mr. Huang said that every order of a foreign trade enterprise must go through several processes: first, negotiate with foreign customers, confirm the conditions of price and delivery, and then make the order to the factory for production, and finally deliver the product to receive the money. Generally, this cycle will take at least two months. If the exchange rate fluctuate during this period, the consequences will be very serious.

Mr Huang said that when they signed the contract, they hoped to lock in the RMB against the US dollar, but business partners were reluctant to do so, so they had to rub with each other every time.

Wu Guoming, general manager of Xiamen new excellent technology Co., Ltd., gave an example to reporters. Taking an order of 1 million dollars as an example, if the contract is signed, the exchange rate of US dollar to RMB is 1:6.8, after 2 months, the exchange rate is 1:6.6, the difference is only 0.2 yuan in terms of figures, but for enterprises, profits are reduced by 200 thousand yuan at once.

"We are all right. The profit margins of making new materials are relatively large. If it is a general enterprise, it will be a sad day." Wu Guoming admitted that such a million dollar order, for many enterprises, the profit is only 3.4 million yuan, no wonder many owners can not sleep in the face of the pressure of RMB appreciation.

Xiamen enterprises have taken a "reassurance".

Vice Minister of Commerce, Zijin Mountain, used this analogy to describe the survival of Chinese foreign trade enterprises: "if the water is heated to 99 degrees, it will not boil, but as long as it continues to rise 1 degrees, the water will boil." Any appreciation of the renminbi can make exporters bankrupt, which is impossible for China to afford.

The business owners in Xiamen are well aware of this, so they will only see a sigh of relief when they see chairman Hu Jintao's position on the RMB exchange rate.

A textile and garment industry in Xiamen told reporters that the average net profit margin of the whole industry is no more than 5%. If RMB appreciation exceeds 5 points, more than half of the enterprises will die. Therefore, for many people, the exchange rate is just like a knife hanging on the head, and it is not known when it will fall.

"Now, this knife is temporarily unable to fall, but for enterprises, it is still necessary to think about how to make the product price go through the exchange rate." The person said.