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RMB rise to impact razor-thin margins of textile sector
13
Oct '10
The central parity of RMB against the US dollar is rising with each passing month. Many agencies predict that the trend of RMB appreciation is expected to continue in the future.

Relevant institutions expect that the appreciation of the RMB will be in the range of 3-5 percent and the increase is in the upper tolerance range limit for most enterprises.

RMB appreciation creates some negative impact on China's exports, while textile and garment industry is highly dependent on foreign trade, so the industry is more sensitive to changes of exchange rate.

The textile industry is more venerable since the sector is mainly made up of small and medium textile enterprises, which lack bargaining power and their tolerance capacity is less.

Experts point out that, for every one percent appreciation of the RMB, the sector would post a decline of one percent in net profit margins. For an industry already operating on razor thin margins, this spells bad news.

The industry also widely expects that recovery pace in exports of textile and garment industry will slow down in the fourth quarter of this year.

Fibre2fashion News Desk - China

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