The impact of RMB depreciation on textile and garment export enterprises

Since the central bank announced on August 11, 2015 that it would improve the central parity quotation mechanism for the US dollar against the RMB exchange rate, the US dollar against the RMB has continued to rise. The RMB has continued to depreciate in the past two weeks, especially 7.12, which reached a historical high of 6.6950 since 2005. As of July 15, the exchange rate of the US dollar against the RMB was 6.6805 yuan/USD, an increase of 2.73% from the beginning of the year and an increase of 7.47% from August 11, 2015. This round of depreciation of the RMB is part of a correction of high valuations. The market generally holds expectations for continued depreciation in the market outlook. Some believe it will reach 7 this year and next. my country is a major exporter of textiles and clothing, and the U.S. dollar is the main settlement currency for export enterprises. The depreciation of the RMB exchange rate has a greater impact on export-oriented enterprises.
Analysis of the global textile and apparel landscape: The demand engine is in the United States, Europe and Japan, and China faces competition from emerging textile countries
Looking at the global textile and clothing export pattern, my country’s textile exports are mostly scattered in developing countries, and clothing exports are concentrated in the United States, Europe and Japan. At the same time, in the imported clothing market of the United States, Europe and Japan, China is the largest source of imports, but its market share is gradually declining. Vietnam is losing, especially the Japanese market. It can be seen that global clothing import demand mainly lies in developed countries such as the United States, Europe, and Japan. On the one hand, my country’s clothing companies directly export clothing to developed countries. On the other hand, my country exports textile raw materials and finished products to emerging textile and clothing industries such as Southeast Asia and West Africa. countries, which are processed into clothing and then exported to developed countries, becoming the main pattern of the global textile and clothing industry. my country’s clothing exports directly face competition from emerging clothing countries and have greater exposure to competitive risks than textiles. Textile exports can also benefit from the demand driven by emerging clothing countries.
Factors affecting my country’s textile and clothing exports: In the short term, they are affected by the global economy, and in the long term they face pressure from the transfer of the world’s textile and clothing center
Since 2011, the growth rate of my country’s textile and apparel exports has continued to slow down, with negative growth (-4.87%) for the first time in 2015. However, the market share continued to increase, reaching 35.16% in 2015, maintaining the first place in the world, far exceeding India, the second largest exporter (market share 4.78%). Although the growth rate of my country’s textile and apparel exports has slowed down, the proportion is still rising, and the compound growth rate is higher than the global average, indicating that the slowdown in export growth in recent years is caused by the systemic risk of the global economic slowdown, which can be foreseen in the short term in the future. If the economy resumes growth, it is expected to drive the growth of my country’s textile and apparel exports; at the same time, my country’s rising labor costs and the rise of emerging textile and apparel countries should also be faced with. In the long run, China’s textile and apparel exports will face the impact of the shift in the world’s textile and apparel center. Export competitiveness will decline.
The depreciation of the RMB will increase the performance elasticity of textile and garment export enterprises in the short term and enhance export competitiveness in the long term. Pay attention to enterprises with greater performance elasticity
In the short term, RMB depreciation affects corporate performance through the following channels: 1) Foreign currency income is converted into local currency, and the depreciation of the local currency drives income growth; 2) Foreign currency assets are adjusted into local currency at the end of the period to generate exchange gains and losses; 3) Hedging and overseas production capacity The layout, raw and auxiliary materials and equipment imports will weaken the impact of depreciation on performance. In the long run, as of July 12, 2016, the depreciation rate of the RMB against the US dollar was higher than that of the Vietnamese dong, Bangladeshi taka, Indonesian ruble, Indian ruble, and Cambodian riel during the same period, which enhanced the competitiveness of my country’s textile and apparel exports. 1) During the same period, the Vietnamese dong depreciated more than the Bangladeshi taka. my country’s main competitor in Europe is Bangladesh, and its main competitor in the United States and Japan is Vietnam. Therefore, it will be more competitive in Europe relative to the United States and Japan. 2) These countries are also the main destination countries for my country’s textile exports. The weakening competitiveness of their downstream clothing exports will suppress the demand for my country’s textiles. At the same time, the depreciation of the RMB will be transmitted to Southeast Asian countries through textile exports, enhancing their profit margins and export price reduction capabilities, and reducing the depreciation of the RMB. Influence.