RMB devaluation to benefit Chinese textile industry

09 Dec '11

1 min read

The devaluation of Renminbi (RMB) against the US dollar is likely to benefit Chinese textile and garment industry, according to a study.

Recently, the Chinese currency has been falling as the investors' hedging demand to buy dollar is strong, which is creating pressure on the yuan. Currently, the central parity is 6.3618 yuan against one US dollar, while the figure was 6.3319 approximately a month ago.

The study says continued slowdown of Chinese domestic growth, including the RMB devaluation, will help stabilize export-oriented enterprises in the country, including textile and garments.

It estimates that every one percent appreciation of RMB will lead to a decline of 2-6 percent in sales profits of the textile industry.

At present, cotton textiles, woolen textiles and apparels, each have an export dependence of 20 percent, 27 percent and 60 percent, respectively. Currently, the average net profit of the Chinese textile industry is only 3-4 percent.

Moreover, most enterprises engaged in China's textile and garment industry are medium and small enterprises (SMEs). Hence, in the prevailing circumstances of difficult financing for SMEs, the textile industry will be more benefited from RMB devaluation, the study adds.

Fibre2fashion News Desk - China

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