Event:
On January 13, the U.S. Department of the Treasury removed China from the list of “currency manipulators.”
January 15, Washington, White House. Liu He, member of the Political Bureau of the CPC Central Committee, Vice Premier of the State Council, and Chinese leader of the China-US Comprehensive Economic Dialogue, and US President Trump signed the first phase of the China-US economic and trade agreement. At this point, Sino-US economic and trade frictions have achieved a phased “cessation of war” and a practical step towards the final resolution of the problem.
Liu He and Trump shook hands at the agreement signing ceremony
Since January 2020, they have received favorable conditions Stimulated by the news, the RMB exchange rate started to soar as if it were on a helicopter! On January 14, the RMB exchange rate against the U.S. dollar once rose above 6.87 yuan, setting a new high for the first time since July last year.
In other words, if we count from December 3, 2019, there will be a surge of nearly 1,900 basis points in 28 days. If we count from September Counting from the low of 7.1854 on the 3rd, the RMB has risen by more than 3,000 basis points so far! This is undoubtedly good news for Chinese people traveling abroad. But for textile foreign trade people, it seems that it is not so good!
The RMB is soaring, and textile foreign trade people want to cry without tears!
Although most weaving and dyeing factories are on holiday now, traders are still fighting. For foreign trade bosses, the future trend of exchange rates will affect their acceptance of orders. and key factors in profit.
Some experts believe that many factors such as the current warming trade situation, improved economic expectations, rising market risk appetite, and the weakening of the U.S. dollar support the RMB’s continued strong operation. So, what impact will the appreciation of the RMB have on Boss Bu?
Generally speaking, foreign trade companies mostly settle foreign exchange in U.S. dollars. When the exchange rate of RMB against the U.S. dollar drops, it means that the profits from the originally negotiated price decrease. For example, if a textile foreign trade boss negotiates a $100,000 order with a customer after successfully quoting, pay 50% of the payment in advance, and pay the remaining $50,000 when the transaction is completed. At this time, if the exchange rate of RMB against the US dollar changes from the original If the value of 6.95 rises to 6.85, then the boss’s $50,000 will also shrink, and he will lose 5,000 yuan in one fell swoop!
Therefore, for Boss Bu, grasping the time of foreign exchange settlement is also an important factor in profitability! The editor once heard that a fabric boss had arranged for an order he had received in advance. The price had been negotiated and the contract was confirmed via email. However, the exchange rate fluctuated so much that the order was almost unprofitable. However, the contract price could not be changed. This part of the price difference I can only eat it myself. Frequent fluctuations in the RMB exchange rate will also make it difficult for companies to quote prices. Therefore, for Boss Bu, rising or falling exchange rates are not a good thing. Only stable exchange rates are the situation they want to see.
It is said that textile workers are miserable! The most difficult thing is the textile foreign trade business!
Since 2019, Sino-US trade relations have been divided and combined, causing difficulties for foreign traders in receiving orders. It is understood that foreign trade orders have also shrunk sharply this year. In the past, orders for tens of thousands of meters have now been reduced to a few thousand meters. Coupled with the impact of tariffs, many foreign traders have suffered greatly and dare not accept orders. If they do, they will lose money, and if they don’t, they will lose even more! According to relevant statistics, in 2019, China’s textile and apparel exports totaled US$271.875 billion, a year-on-year decrease of 2.22%.
With the signing of the phased agreement in 2020, the foreign trade environment will improve, and many orders from the United States will not be subject to tariffs. This is undoubtedly good news for the market, especially for companies with more orders from the United States. However, because there have been too many divisions and mergers in the past, textile people cannot be blindly optimistic. In the future, textile foreign trade people will still face very severe situations.
Afterword
In addition to the uncertainty in Sino-US trade relations and the exchange settlement risks brought about by the appreciation of the RMB, China’s The competitive advantage of products is not obvious enough. As the cost of raw materials, rent, water and electricity continues to increase, domestic enterprises have lost their advantages as processing centers. Currently, global textile and apparel manufacturing is accelerating its transfer from China to Southeast Asia and other places with lower labor costs. The textile and apparel industry, which has always been dominated by foreign trade exports, has been greatly impacted, especially mid- to low-end products, which have low profits. It has always relied on running volume to win, but since 2019The order volume has dropped significantly, and now the company can no longer guarantee even the most basic profits. In the future, if textile exports want to occupy a place in the world, they will probably have to move towards high-end, high-profit fabrics.
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