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RMB appreciation alarms textile sector of likely recession

16
Apr '08
RMB appreciation has virtually paralyzed the textile industry and the situation is likely to worsen if the trend is allowed to continue for even a little longer.

Expert estimates show that with every one percent appreciation of RMB, profits of the export products would decline to a certain level. Individually, textile industry would see a drop of 12 percent, wool industry of 8 percent and apparel sector of 13 percent.

Being the highest revenue earner, the garment industry is bound to suffer greater losses. Moreover, large companies with higher profit margins may only face a marginal loss but with increased revaluation of RMB, the extent of negative effects is sure to get expanded.

Professor Wang Kangmao of East China College of Political Science and Law anticipated a drop of 30 percent in textile exports if RMB appreciates by 3 percent. The brutal consequences of such negative trend will largely be borne by SMEs relying on low value-added products and low price competition.

These small enterprises will have no other alternative but to head for a closure throwing thousands of people out of work.

One of the major advantages of RMB appreciation is that it will help check the prevalent inflation of China. An increase of 10 percent in RMB will relatively increase the prices of certain commodities by 10 percent.

On the other hand with similar assumptions, export of Chinese products will drop by 4 percent. Already, under present situation, textile and apparel exports are witnessing a recession.

Fibre2fashion News Desk - China


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