Is it good or bad for the RMB to enter the era of 6.5 yuan? This issue must have been hidden in the minds of foreign traders for a long time, and many foreign traders have even been hurt by it.
At the end of the year, when foreign trade companies are extremely busy, the RMB began to appreciate sharply, which brought a hint of gloom to foreign trade companies.
“For several months, we have been working overtime and busy with production, and we are grateful for the significant increase in orders. However, the sharp appreciation of the RMB has caused our profits to shrink a lot. The more orders we have, the more revenue we will earn. For a good company, the more severe the losses, who can bear it?” On November 27, Li Yong, the head of a Zhejiang textile company, complained to reporters.
On November 18, the central parity rate of the RMB exchange rate in the inter-bank foreign exchange market rose to 6.5593 yuan per U.S. dollar, officially opening the “6.5 yuan era.” At the same time, the onshore and offshore RMB exchange rates against the US dollar have successively hit new highs in the past two and a half years. Compared with the low of 7.1765 yuan onshore RMB against the US dollar on May 27, the RMB has risen by more than 6,000 points, an increase of 8%.
But this is not the highest point of the RMB. Zhu Haibin, chief China economist at JPMorgan Chase, predicts that the RMB exchange rate is expected to rise to around 6.25 next year.
Wealth has shrunk
Although the signing of RCEP and new progress in foreign vaccines have provided support, many textile company owners still said that the depreciation of the U.S. dollar , shipping prices have increased, leaving little profit.
Currently, the production capacity of overseas factories has shrunk significantly due to the epidemic, resulting in strong demand for Chinese products around the world. There are many orders, but revenue and profits have shrunk significantly between changes in interest rates. This is a huge impact on the company.
Li Yong recalled that starting a few months ago, the foreign trade orders flowing into the country suddenly increased significantly, and almost all companies received new orders that exceeded expectations. This is a huge benefit for companies that are recovering from the epidemic.
“When there are orders, there will be production, and production companies will regain their vitality. At the beginning, orders only increased slightly, but in recent months, the order volume has increased significantly, and almost all of us have We are working overtime to catch up on orders,” Li Yong said.
Especially in the past five years, the exchange rate of RMB against the US dollar has reached a low point. According to estimates, Li Yong’s business revenue has increased approximately three times in recent months.
But in the days that followed, Li Yong watched helplessly as the RMB rose and the U.S. dollars lying in his bank account continued to shrink. This was unacceptable to him.
“The RMB exchange rate has fluctuated too much this year. Although it is basically based on the long-term exchange rate now, the agreement at the high point and now reaching the low point of the US dollar will still have an impact on the company.” Li Yong explain.
Lianfa Co., Ltd. is a full-industry chain textile enterprise integrating spinning, dyeing, weaving, finishing and garment making. The company previously responded on the Huayi platform: It is true that European and American retailers have transferred Indian textile orders to my country for production, but the company mainly produces pure cotton products such as yarn-dyed fabrics, printed and dyed fabrics, home textile gray fabrics, and the current benefits are not obvious.
Meng Zhuo, manager of Anhui Garment Import and Export Co., Ltd., said that the company’s export volume during this peak season (July to October) is approximately US$150 million, and the settlement time generally lags behind the shipment time. In one month or 45 days, based on the exchange profit and loss of 0.20 per US dollar, the loss will reach 30 million yuan. The company usually adopts currency lock measures for some orders, but these are not enough to offset the impact of this wave of rising raw material and transportation costs.
An industry insider said that for relatively small foreign trade companies in Jiangsu and Zhejiang, the best interest rate for survival is 7. After reaching 6.7, foreign trade companies have almost no profit.
Therefore, when the appreciation of the RMB exceeds the psychological expectations of foreign trade companies, many foreign trade companies will calculate the profit compression. If the business owners value book losses and are hesitant about delivery and exchange, it will lead to “book losses.” “Panic”; and waiting for the RMB to depreciate without exchanging currency for a long time can easily lead to the embarrassment of lack of liquidity.
One embarrassment is that the current foreign exchange hedging channels for mainland enterprises are still very limited, and their hedging capabilities are limited. The most important thing is that with the appreciation of the RMB, orders from foreign companies are often accompanied by price reductions and other situations.
Multiple means to deal with the impact of appreciation
In order to minimize the impact of RMB appreciation on foreign trade companies, regulators canceled the long-distance purchase risk reserve in early October , and then “faded out” the central parity countercyclical factor. In addition, in the past two months, regulators have successively approved more than 15 billion US dollars in QDII (Qualified Domestic Institutional Investor) quotas, hoping to return to neutrality through macro-prudential measures and relax capital outflow channels to moderate the rise of the RMB.
Tan Yaling, president and chief economist of the China Foreign Exchange Investment Research Institute, also suggested that the government should introduce a coordination mechanism. For example, when exchanging U.S. dollars for RMB, banks should provide support channels and combine the parameters of the currencies of 27 countries. In the foreign exchange settlement of enterprises; when trading with Southeast Asia, enterprises are encouraged to use local currencies to avoid exchange rate risks; the government can also support foreign trade enterprises to deal with exchange rate risks through subsidies, tax cuts, etc.
ICBC InternationalChief Economist Cheng Shi believes that the RMB exchange rate is expected to experience a “fast first and then slow” appreciation process in two-way fluctuations, and the U.S. dollar-RMB exchange rate is expected to fall to around 6.40 in the first half of 2021. It is expected to remain at a high level in 2021, and the RMB exchange rate is expected to maintain long-term stability.
However, in the view of Wang Tao, chief economist of UBS Greater China, the United States is still a variable. The Trump administration may introduce some more measures against China. There are also some risks after the new administration takes office, which may also disturb the market in the short term and put pressure on the RMB exchange rate.
For textile foreign traders, the recent exchange rate is very worrying, but at least most traders now have orders on hand to execute, which is better than the situation in the first half of the year when they had no orders to do and were on a rotational basis. Too much.
In the long run, the rebound in foreign trade orders and the appreciation of the RMB also represent the continuous improvement of China’s strength. At least in the textile industry, it has become increasingly difficult for other countries to replace China. In this regard, the editor also reminds all textile foreign trade people that when foreign trade is currently unsatisfactory, the future corporate layout still needs to shift to the domestic market. Although it is difficult for long-term foreign trade companies, this is also A way to solve business revenue. </p
