Apparel / Textiles & Accessories

On the evening of September 15, the exchange rate of the offshore RMB against the US dollar fell below the "7" mark. After a lapse of more than two years, the exchange rate of RMB against the US dollar has once again entered the "7" era. On September 16, the exchange rate of the RMB against the U.S. dollar also depreciated below the integer mark of "7" in the onshore market, with a minimum of 7.0188, hitting a new low for more than two years.

"Broken 7" no need to panic

A number of industry experts pointed out that there is no need to pay too much attention to whether the RMB exchange rate "breaks 7" or not. "Breaking 7" does not mean that the RMB will depreciate significantly. At present, the two-way fluctuation of the RMB exchange rate is the norm, and it is normal to rise and fall. Some institutions believe that the moderate and orderly depreciation of the RMB exchange rate is conducive to boosting exports and playing the role of an automatic stabilizer for the exchange rate to adjust the macro economy and international trade balances.

For a long time, "7" has been regarded as an important psychological barrier, and the RMB exchange rate has also broken "7" many times. For example, in August 2019 and May 2020, the RMB exchange rate broke "7" due to trade frictions and the epidemic, respectively.

In fact, after the "Break 7" in August 2019, the RMB exchange rate has opened up the flexibility to go up and down. Now, both the government and the market have greatly increased tolerance and adaptability to two-way and wide fluctuations in exchange rates. This can be confirmed from the recent performance of the international trade market: this round of decline in the RMB exchange rate since August 15 has not been accompanied by market panic.

At present, my country's foreign exchange settlement and sales market is running smoothly. Since August, banks' foreign exchange settlement and sales and foreign-related receipts and payments have shown a double surplus. In August, banks' foreign exchange settlements and sales had a surplus of US$25 billion, and non-banking sectors such as enterprises and individuals had a surplus of 113 billion in foreign-related receipts and payments. billion, both higher than the monthly average this year. Overall, foreign investors bought Chinese securities on a net basis, and participants in the foreign exchange market became more rational. The transaction model of "foreign exchange settlement on rallies" was maintained, and the exchange rate was expected to be stable.

In the future, with the stabilization of the domestic economy and the correction of the US dollar index, the RMB exchange rate will rise back to the "6" range.

It is difficult for textile international trade enterprises to benefit

Some experts believe that a moderate depreciation of the RMB exchange rate is conducive to international trade exports, and will enhance the competitiveness of China's international trade export products to a certain extent. However, for the RMB exchange rate to "break 7", some market views are worried that it will have adverse effects in some aspects. For example, depreciation expectations may exacerbate capital outflows; exchange rate depreciation leads to rising raw material import costs, aggravating imported inflationary pressures, and squeezing profits of downstream industries; increasing external debt repayment pressures; restricting domestic monetary policy, and policy space for stabilizing growth limit etc.

When it was close to breaking "7" before, according to media investigations, textile international trade export enterprises did not benefit from the depreciation of the exchange rate. Due to the damage to overseas industrial chains caused by overseas epidemics, although China's textile exports have increased this year, more are exported finished products, and the number of directly exported fabrics has decreased. Therefore, the dividend of exchange rate, textile export enterprises did not benefit. On the other hand, the price of imported raw materials will rise due to the depreciation of the exchange rate. Among them, although most of the polyester filaments are currently domestically produced, the upstream raw materials, whether it is the most advanced crude oil or PX, which is necessary for the production of PTA, still need to be imported in large quantities. The prices of these raw materials have risen due to the depreciation of the exchange rate. Therefore, the price of raw materials has risen, the price of polyester has also risen, and the cost of downstream textile enterprises has also increased.