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Prospects of RMB appreciation raise jitters

07
Apr '10
Recently various associations led by relevant ministries are conducting studies of the impact of appreciation of the RMB exchange rate on labor-intensive industries.

According to the test results, RMB appreciation will have greater impact on export profits in the short term on mechanical, electrical, textiles, clothing and light industry.

Industrial profit margins are expected to drop significantly, if the RMB appreciates rapidly in the short term, which could also mean, some industries will face losses.

According to estimates of the textile and apparel sector, profits will fall by one percent with one percent appreciation of the RMB, that too if all other cost parameters remain unchanged.

The test results also reveal that, current average net profit margin of textile and apparel enterprises in China is 3-5 percent; with the same of a few, less than three percent.

On the other hand, industries with lower export dependence and greater dependence on imports of raw materials may benefit from the Renminbi appreciation.

Fibre2fashion News Desk - China


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