Home / Knowledge / News / Textiles / Appreciating Yuan adds to woes of T&G sector
Appreciating Yuan adds to woes of T&G sector
29
Dec '08
Since the day, China has introduced the managed floating exchange rate system based on market supply and demand with reference to a basket of currencies from July 21, 2005; so far the Renminbi has cumulatively appreciated 16 percent against the US dollar. At present, the dollar is still traded for all settlement of China's foreign trade. With the rapid appreciation of the Yuan, many industries are expected to be affected by the appreciation to different extents.

The cotton textile industry:
The cost of raw materials accounts for 65 percent of all expenses in the cotton textile industry while average gross margins are around 10 percent, based on industry-related statistical indicators. The cotton textile industry mainly produces cotton yarn and grey fabrics. A higher proportion of its raw materials are related to international prices and value added to its products is low.

Hence the bargaining power of cotton industry is weak and has to absorb 90 percent of the RMB revaluation pressure, due to which realizations from exports are lower than for other industries. Dependency on exports of the cotton textile industry is nearly 20 percent, so every one percent of RMB appreciation means, 3.19 percent decline in profit margins of the cotton textile industry as a whole.

The wool textile industry:
In this industry, cost of raw materials accounts for 60 percent and the average gross margin are around 12 percent, based on industry-related statistical indicators. Although the wool industry mainly relies on imported raw materials, its product bargaining power is stronger than cotton textile but weaker than apparel industry, due to its longer industrial chain and higher value addition, so its losses from exports are relatively less.

Export dependence of wool textile industry is 27 percent, so, every one percent of RMB appreciation means 2.27 percent drop in profit margins of the industry as a whole, which is lower than that of the cotton textiles and garment industry and across the whole sector.

The garment industry:
The cost of raw materials accounts for 55 percent of all costs in the garment industry with the industry margins averaging 14 percent, based on industry-related statistical indicators. The garment sector has a higher bargaining power as it is more labour intensive and carries a comparative advantage vis-à-vis the cotton and wool industry and due to which garment manufacturers are able to competitively price their products in global markets.

Exports from the garment sector are the highest across the whole sector and accounts for 60 percent of all clothing manufactured in the country, so variation or appreciation in the Yuan affects the highest. A one percent revaluation of the RMB means 6.18 percent decline in profit margins of the apparel industry, which is the main reason for the slow growth rate in exports of clothing to the US in 2008.

Fibre2fashion News Desk - China


Must ReadView All

Nigeria's ABP scheme targets 1 lakh cotton farmers in 2019

Textiles | On 21st Mar 2019

Nigeria's ABP scheme targets 1 lakh cotton farmers in 2019

The Central Bank of Nigeria’s (CBN) Anchor Borrowers Programme (ABP)...

Pic: CorePower Yoga

Apparel/Garments | On 21st Mar 2019

TSG Consumer Partners takes over CorePower Yoga

TSG Consumer Partners, a leading private equity firm focused...

Pic: Showcase USA

Apparel/Garments | On 21st Mar 2019

Showcase USA store helps in cross-border e-commerce sales

Leveraging the backbone of ABC Depot Logistics, the exclusive 3PL and ...

Interviews View All

Rahul Bhadani, Looksgud

Rahul Bhadani
Looksgud

Navigating through catalogues is a bit hasslesome

Jurgen Gauger, Spreadshirt

Jurgen Gauger
Spreadshirt

‘Buying crowdsourced or creative designs are much more appealing to the...

Nuno Venda, ROQ

Nuno Venda
ROQ

‘There has been an increase in demand for water based inks, rather than...

Iacopo Pardini,

Iacopo Pardini

Founded in 1953, Italian engineering company Arioli Spa started...

Umang Banthia,

Umang Banthia

Established in 2005, SL Banthia Textiles manufactures coated fabrics....

Gagan Gulati,

Gagan Gulati

PG Silk Mills Private Limited had a humble start with a hand-dyeing unit....

Mark Brill, Birmingham City University (BCU)

Mark Brill
Birmingham City University (BCU)

<div>A technological breakthrough could see people getting messages about...

Urs Stalder, Sanitized AG

Urs Stalder
Sanitized AG

Urs Stalder, CEO, Sanitized AG, talks about the increasing use of hygiene...

Georg Reinhold, Trützschler  Nonwovens & Man-Made Fibers

Georg Reinhold
Trützschler Nonwovens & Man-Made Fibers

Trützschler Nonwovens & Man-Made Fibers, a part of the Trützschler Group,...

Mike Hoffman, Gildan Activewear SRL

Mike Hoffman
Gildan Activewear SRL

Gildan Activewear, a manufacturer and marketer of branded clothing and...

Divvya and Nidhhi Gambhir, Walnut

Divvya and Nidhhi Gambhir
Walnut

<b>Divvya and Nidhhi Gambhir</b> started their career with the launch of...

Robert Brunner, Devereux

Robert Brunner
Devereux

Golfwear and menswear brand Devereux is set for greener pastures. Robert...

Press Release

Press Release

Letter to Editor

Letter to Editor

RSS Feed

RSS Feed

Submit your press release on


editorial@fibre2fashion.com

Letter To Editor






(Max. 8000 char.)

Search Companies





SEARCH

Leave your Comments


March 2019

Subscribe today and get the latest update on Textiles, Fashion, Apparel and so on.

news category


Related Categories:

Advanced Search