“The momentum is like a rainbow”! Many people use this word to describe the recent surge in the RMB exchange rate. From the appreciation curve of the RMB exchange rate since the end of May, you can feel how violent the RMB appreciation is.
Screenshot of the central parity rate of the RMB against the US dollar
As the United States turns to its money printing press, in March Since late late, the U.S. dollar index has entered a downward trend and has shown no signs of reversal so far. The RMB has continued to appreciate since the end of May, with the USD/RMB exchange rate continuing to appreciate from 7.17 at the end of May to currently exceeding 6.8. In addition, the exchange rate of the RMB against major currencies such as the euro, Japanese yen, and pound sterling has also appreciated recently.
On September 16, the central parity rate of the RMB exchange rate in the inter-bank foreign exchange market was 6.7825 yuan per US dollar, a significant increase of 397 basis points from the previous trading day, exceeding the 6.8 mark.
Looking over a long period of time, the central parity rate of the RMB against the U.S. dollar was 7.1316 on May 29. In just over 3 months, the central parity rate of the RMB against the U.S. dollar appreciated by 3,491 basis points.
The exchange rates of offshore and onshore RMB against the US dollar are even more “rising.” On the morning of September 16, the onshore and offshore RMB exchange rates both once exceeded the 6.77 mark.
Especially for low-profit, labor-intensive enterprises, this year is too difficult. Orders have already dropped sharply due to the impact of the epidemic, and then the meager profits will be eaten up by the exchange rate. . Some people say: If the exchange rate rises to 6.5, as a foreign trade person, this year’s work will be in vain. Have you settled the exchange? Have you updated your quotation? Can profits still be sustained?
Why did the RMB appreciate significantly?
As for the reasons for the strengthening of the RMB exchange rate, Wen Bin, chief researcher of China Minsheng Bank, told a reporter from China News Service:
First, China Economic fundamentals continue to improve;
Second, the U.S. dollar index continues to fall, and non-U.S. currencies, including the RMB, have shown an appreciation trend;
Third, international investors are optimistic about China’s economic prospects and RMB assets. Foreign capital continues to flow into China’s capital market, driving the appreciation of the RMB.
RMB and US dollar data chart
Improvement of China’s economic fundamentals This can be felt from the latest economic data released. Economic data for August released by the National Bureau of Statistics on September 15 showed that many key indicators such as consumption turned from negative to positive for the first time this year.
Specifically, total retail sales of consumer goods increased by 0.5% year-on-year in August, the first positive growth this year; from January to August, the added value of industrial enterprises above designated size nationwide increased by 0.4% year-on-year. The growth rate turned from negative to positive; exports increased by 0.8% from January to August, and the cumulative growth rate during the year achieved positive growth for the first time; commercial housing sales increased by 1.6% from January to August, also achieving positive growth for the first time.
Ming Ming, chief analyst of CITIC Securities Fixed Income, said that against the background of global central banks maintaining easing, China’s central bank has remained cautious and stable in its monetary policy during the epidemic, and the interest rate gap between China and the United States has Maintaining a high level, the attractiveness of RMB assets has significantly increased, which has also promoted the strengthening of the RMB exchange rate.
What impact will the sharp appreciation of the RMB have on textile companies?
For companies, the strengthening of the RMB against the US dollar is good for importing companies, but will bring certain pressure to exporting companies. Wen Bin analyzed that from the perspective of import companies, the appreciation of the RMB, especially not only against the US dollar but also against a basket of currencies, will reduce procurement costs and increase profits.
However, it has had a greater adverse impact on export companies. Affected by the epidemic, external demand has slowed down, and the appreciation of the RMB has led to an increase in the cost of export products, which in turn has affected the products of export companies. competitiveness in the international market, there will also be exchange rate risks, which may lead to exchange losses. Therefore, export enterprises must take measures to prevent and avoid exchange rate risks.
Currently, many companies have taken measures to reduce exchange losses. Hongbai New Materials, a listed company, recently issued an announcement stating that foreign sales account for a large proportion of the company’s operating income and plans to carry out forward foreign exchange settlement and sales business of no more than 50 million US dollars to reduce the impact of future fluctuations in the exchange rates of the US dollar and the euro against the RMB on the company’s operating performance. .
According to expert analysis, the strengthening of the RMB exchange rate may continue, but taking into account possible subsequent risks, including global risk aversion and Sino-U.S. relations As well as asymmetric capital controls, the RMB exchange rate may show a slowing appreciation trend, and the short-term RMB exchange rate range may be 6.7-6.8. The continued appreciation of the exchange rate may have a certain impact on China’s exports and manufacturing industry.
“It is necessary to increase policy support for export-oriented enterprises and increase financial, financial, export tax rebate and other aspects of support.” Wen Bin suggested. </p
