Interviews
RMB devaluation makes greater sense than increasing tax rebates
05 Dec '08
1 min read
In recent days, the exchange rate of RMB against the U.S. dollar has remained low, which is considered as an opportunity by experts from the industry. According to them the devaluation has come as a boon and would help the industry survive through these troubled times.
Market analysis points out that a short-term downward trend of the RMB has been noticed. Since 2007, the RMB exchange rate against the U.S. dollar had continued to appreciate, resulting in reduced export profits of clothing enterprises. While, raw materials and labour costs are denominated in Yuan, those of exports are settled in U.S. dollar, due to which a huge amount of profit was lost.
Therefore industry regards this continuous drop of RMB as a salvation in these troubled times. Experts say, every 1 percent depreciation means a equivalent increase in the profits to the industry which is good news for the industry. So they aver that the Renminbi devaluation makes greater sense that increasing tax rebates.
Market analysis points out that a short-term downward trend of the RMB has been noticed. Since 2007, the RMB exchange rate against the U.S. dollar had continued to appreciate, resulting in reduced export profits of clothing enterprises. While, raw materials and labour costs are denominated in Yuan, those of exports are settled in U.S. dollar, due to which a huge amount of profit was lost.
Therefore industry regards this continuous drop of RMB as a salvation in these troubled times. Experts say, every 1 percent depreciation means a equivalent increase in the profits to the industry which is good news for the industry. So they aver that the Renminbi devaluation makes greater sense that increasing tax rebates.
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