Composite Fabric,bonded fabric,Lamination Fabric Lamination Fabric News Lack of technical advantages, the benefits of RMB devaluation are taken away by foreign businessmen

Lack of technical advantages, the benefits of RMB devaluation are taken away by foreign businessmen



In the middle of last month, without any prior warning, the People’s Bank of China suddenly lowered the central parity rate of the RMB against the U.S. dollar by 1,000 basis points to 6.2298. The magnitud…

In the middle of last month, without any prior warning, the People’s Bank of China suddenly lowered the central parity rate of the RMB against the U.S. dollar by 1,000 basis points to 6.2298. The magnitude was not only the largest single move since the integration of the official and market exchange rates of the RMB in 1994. The daily decline also caused the RMB exchange rate to fall to a new low since April 25, 2013. One stone stirs up a thousand waves. Active currency devaluation is usually regarded by traditional economists as a “life-saving straw” to improve a country’s export industry.
For many years, the cotton spinning industry has had a false proposition that has misled investors. The general idea is that currency depreciation is beneficial to the export of the downstream textile and garment industry, which will lead to an increase in export orders, thereby increasing the use of cotton and cotton yarn. As demand expectations increase, the prices of cotton and cotton yarn will rise, making the entire industry chain prosperous. This dose of “ecstasy soup” has indeed stunned the heads of many academics. The author believes that, looking at the current situation, this is no longer the case.
“The depreciation of the RMB will help increase the export price of textile and clothing? Haha! In fact, you are thinking too much.” This is the exact words said by the person in charge of a domestic textile export company in a conversation with the author. China’s textiles are positioned at the mid- to low-end level. Compared with other countries, they only have price advantages and no other core technical advantages. Therefore, for a long time, the domestic textile industry has not only had extremely low profits, but has also become synonymous with “sweatshops.” It is understood that a few days after the RMB exchange rate sharply depreciated against the US dollar in the middle of last month, this company received an email from a foreign businessman asking for a 2% price reduction for the next batch of orders. If it did not agree, it would send the order to Vietnam, Laos, Countries with low labor costs such as Cambodia. Companies can only be forced to accept the demands of foreign investors.
“Man is a slave, and I am a fish. In the absence of technological advantages and relying solely on price competition, we can only survive in the vicious circle of ‘there is no lowest, only lower’.” The person in charge of the above-mentioned textile enterprise lamented. The benefits of the devaluation of the RMB have essentially been taken away by foreign businessmen. Chinese textile companies still cannot enjoy any benefits and still have to work hard to earn the meager hard-earned money. In addition to the difficulty in improving profits on the textile finished product side, the imported raw materials side is also making matters worse. The cost of foreign exchange payment for imported cotton yarn has greatly increased. Currently, textile companies adopt a buy-as-you-go strategy. There is not much inventory, and most orders are still being cleared at customs and at sea. The depreciation of the RMB exchange rate has increased corporate procurement costs, further shrinking industry profits, thereby weakening the demand for cotton and cotton yarn in disguise. Volume is not conducive to its price rising.
This sudden overnight depreciation seems to have a supporting effect on the quotations of cotton and cotton yarn in the short term, but in the long term, it actually does not benefit exporters at all. Even if there are so-called benefits, they are short-lived. Because an industry that relies solely on simple imitation and ignores product research and development, and only has cheap labor and primary resources, is difficult to obtain long-term stable profit returns.

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Author: clsrich

 
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