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Non-stop appreciation of RMB casts shadow
20
Sep '10
The textile and apparel industry expects that export growth of China's textile and apparel industry, will slow down in the fourth quarter of this year, as RMB appreciation would create some negative impact on the export-oriented industry.

However, recovery trend in the textile and apparel industry will not change, due to strong domestic consumer demand.

The central parity of RMB against the US dollar rose further by 69 basis points to 6.7181 Yuan / dollar on September 16, which meant that, the RMB hit a new low for the fifth consecutive trading day, against the US dollar, since the exchange reforms in 2005.

The central parity of RMB against the US dollar has surged 636 basis points since September 10. Many agencies predict that appreciation trend of the Renminbi is expected to continue.

RMB appreciation would cause some negative impact on China's exports, while the textile and garment industry, as an industry with high dependence on foreign trade, is more sensitive to changes in exchange rate.

Especially a lot of small and medium textile enterprises in the industry have less tolerance to the appreciation due to lack of bargaining power, so exports of the whole industry will be adversely affected by the appreciation.

The textile industry estimates that for every 1 percent appreciation of Renminbi, the net profit margins of the sector will decline by 1 percent and if the RMB continues to appreciate, the profit margins of the textile industry will be wiped out, since it already works on low profit margins.

Fibre2fashion News Desk - China

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