After The Exchange Rate Breaking "7", The Profits That Are Consumed By The Tariff Are Expected To Return, And The Textile Enterprises Are Mixed With Joy And Sorrow.

RMB has broken 7. In August 5th, in the early morning of the Asian market, the offshore renminbi fell below the 7 integer mark against the US dollar, with a minimum value of 7.0532. Previously, offshore renminbi against the US dollar also fell below 7 yuan mark. In addition, the central parity of RMB against the US dollar dropped 6.90 points, the first time since last December.
This news has caused an uproar in the textile market, and the textile mentality has also undergone subtle changes. So how does exchange rate change affect textile enterprises?


01, the profit of the exchange will be returned.


Textile trade orders are not ideal this year. According to incomplete statistics, foreign trade orders in the first half of this year decreased by 50% compared with the same period last year. As orders fell, profits fell from 20% to 10%-15%. The depreciation of the renminbi constitutes a great advantage for exports. Generally speaking, the depreciation rate of RMB is 1%, the sales profit margin of textile and garment industry is increased by 2% to 6%, and enterprises can directly benefit from the depreciation of RMB. "We did not expect to fall suddenly. We thought we had talked about it almost, and increased the proportion of forward lock in to RMB, but we did not expect to break 7." The head of a textile export enterprise in Zhejiang said, "in the past, when the exchange rate fell, it might encounter customer pressure, but since last year, it has gone through a very special period. The price reduction is still relatively small. The fall in the exchange rate is indeed conducive to the thickening of the financial profits of the export enterprises, especially the textile industry which is more sensitive to the price."


02 or will hedge 300 billion of China's exports to the United States 10% tariff.


In August 2nd, Trump announced an additional tariff of 10% on the remaining 300 billion Chinese goods exported to the United States, and pushed foreign trade enterprises to the cusp. Today, the exchange rate breaking "7" can be said to be a piece of good news. Textile traders have mixed feelings. If the exchange rate has been able to maintain a "7" high position, the difference brought about by the exchange rate will cause a hedge on the 10% tariff, which will alleviate the pressure of foreign trade enterprises to a certain extent.


03 or will drive the foreign trade market in the second half of the year.


For the entire textile market, the exchange rate breaking "7" also affects the textile market in the second half of the year. The order of textile fabrics is generally quoted according to the real time exchange rate. The higher the exchange rate, the lower the dollar price of the fabric. The recent fabric price will certainly drive the desire of foreign purchasers to place orders. Compared with the first half of the year, the price advantage in the second half of the year is obvious, and it is also the time of concentration of foreign trade orders. The exchange rate breaking "7" will boost the arrival of "golden nine silver ten".

But at the same time, the decline of the RMB exchange rate will also bring negative side to the textile enterprises.


01 the price of imported raw materials will be under pressure.


From the point of view of exports, the exchange rate breaking "7" has many favorable factors, but from the aspect of imports, there are still some drawbacks. Back to the source of fabrics, PX, ethylene glycol two polyester raw materials, mostly from imports. Although domestic production capacity of bulk materials has been improving in the past two years, the demand for raw materials needs to be partially dependent on imports. In the first half of 2019, the import volume of MEG in China was 5 million 40 thousand tons, while the import volume of PX was 7 million 906 thousand tons. When the exchange rate of RMB decreases, the import price of PX and ethylene glycol will also rise correspondingly, or the price of polyester will increase. The price of raw materials purchased by chemical fiber spinning enterprises has increased relatively. The high price raw materials are the main factors affecting the downstream textile enterprises' orders, and they are directly affecting the profits of the enterprises.


02 exchange rate fluctuation risk, trade late risk increase.


The exchange rate is too high, that is, the greater the risk. In recent years, the fluctuation of exchange rate is more frequent, which has a certain impact on the quotation of textile enterprises. There will be a lag in fabric quotation and customer order for foreign textile enterprises, and when the order is issued, the exchange rate will be different from the quoted price. If the exchange rate is back to 6.8, cloth boss will lose 0.2 US dollars per metre cloth. For some low-end products, the profit per metre is $0.2. The exchange rate of the renminbi, like roller coaster, is also a test of settlement. If we fail to grasp the opportunity, we may lose in vain, but if we grasp it, our profits will be rich. In July, for example, 10 thousand yuan can be exchanged for 68700 yuan, and now it can be changed to about 70532 yuan. That is to say, today's settlement is 10 thousand yuan more than 1800 yuan! Rise and fall, a slight fluctuation will affect thousands of thousands of profits, which can be said to be very stimulating.


In August 5th, the head of the people's Bank of China made a series of responses to the trend of "breaking 7" of the RMB exchange rate, which is as follows:


Influenced by unilateralism and protectionist measures and the expectation of China's tariff increases, the RMB exchange rate has depreciated against the US dollar today, breaking through 7 yuan, but the renminbi continues to maintain stability and strength against a basket of currencies. This is a reflection of market supply and demand and international exchange market volatility. China implements a regulated floating exchange rate system based on market supply and demand and reference to a basket of currencies. Market demand and supply play a decisive role in the formation of exchange rate. The fluctuation of RMB exchange rate is determined by this mechanism, which is the proper meaning of floating exchange rate system. From the perspective of global market, it is observed that the exchange rate fluctuation is also normal as the price ratio between currencies is fluctuant. The price mechanism can play the role of resource allocation and automatic adjustment.


If we look back on the change of RMB exchange rate over the past 20 years, we will find that when the RMB has more than 8 yuan against the US dollar, there are more than 7 yuan and 6 yuan, and now the RMB exchange rate is back to more than 7 yuan. What needs to be explained is that the RMB exchange rate is "breaking 7". This "7" is not the age. In the past, it could not come back, nor was it a dyke. Once it was washed away, the flood would be a great drain. "7" is more like the water level of the reservoir. When the flood season is higher, it will drop down and rise and fall when the dry season is over.


In addition, Li Liuyang, chief foreign exchange analyst at China Merchants Bank, said that considering the possibility that the US Federal Reserve would cut interest rates again during the year, the bounce of the US dollar index would be limited. The RMB exchange rate will be strengthened once the Fed expects to cut interest rates again at the end of the year.


It is more likely that the RMB exchange rate will rise at a later stage and tend to be stable. For textile enterprises, the stability of exchange rate is the most favorable side. Whether it is quoted or settled, stable exchange rate will not cause losses to enterprises. From a macro perspective, the exchange rate is stable, and the overall economic situation is good. It also plays a stabilizing role in the economy of the industry. The order situation of the enterprises will not encounter too many variables.


It is concluded that although the textile market is greatly influenced by external factors and exchange rate fluctuations, textile enterprises need not be too anxious. They should regain confidence and actively respond to the market in the second half of the year. It is hard to strike iron itself. For textile people, it is the most important thing to do well in their own products.