The RMB continues to strengthen, putting export companies under pressure

Customs data shows that the exports of Chinese companies have been under multiple pressures recently, especially the continued depreciation of the yen and the euro. Some companies said that their monthly exchange losses alone are as high as 1.5 million yuan, and their export prices have reached extreme lows. In this regard, industry insiders remind that companies should make full use of hedging tools and expand the scale of RMB settlement.
Since the beginning of this year, the continued appreciation of the real effective exchange rate of the RMB has been regarded as an unfavorable factor for the sluggish foreign trade data, especially the decline in exports. The recent “continuous decline” of the Japanese yen has made Chinese export-oriented enterprises even more worried. Wang Desheng, deputy general manager of Tianjin Zhenxing Textile Co., Ltd., said in an interview with a reporter from International Business Daily: “The yen has been depreciating. If the renminbi continues to be strong, it is estimated that companies will face survival problems.”
Some analysts pointed out that the continued strength of the RMB exchange rate, the continued weakness of domestic and foreign demand, and the rigid increase in labor costs have made it difficult for China’s foreign trade, especially labor-intensive enterprises, to continue to exert its advantages, and the prospects are hardly optimistic.
Businesses are having a hard time
“The depreciation of the yen has led to losses for the company’s Japanese headquarters; the appreciation of the renminbi has led to losses for domestic companies. Under the current situation of depreciation of the yen and appreciation of the renminbi, the overall situation of our company is not optimistic.” According to Wang Desheng, the company is currently a The monthly currency exchange loss amounts to more than 1.5 million yuan, and the annual loss is 18 million yuan.
According to statistics, since May 19, the exchange rate of the US dollar against the Japanese yen has risen from 119 to over 125, and last Friday hit a new high in nearly 13 years. As of 19:30 on June 8, Beijing time, the exchange rate was still as high as 125.28.
Wang Desheng told reporters that the price of the company’s products exported to Japan has now reached the limit, that is, the price of towels produced in China is the same as that of products produced in Japan. If the price continues to rise, even by 1%, Japan will not They are willing to process in China, and now many factories have moved to Myanmar, Vietnam, Pakistan and other places.
The situation of Tianjin Zhenxing Textile is not unique. The relevant person in charge of a clothing company in Ningbo told reporters that due to frequent fluctuations in the RMB exchange rate, customers have become increasingly cautious when placing orders. The company’s exports from January to May fell by nearly 20% compared with the same period last year.
“The export exchange loss in the recent quarter was equivalent to 11% of the company’s profits in the same period.” The person in charge said frankly.
Li Shumin, general manager of Guangzhou Mona Lisa Building Materials Co., Ltd., told a reporter from International Business Daily that 65% of the company’s products are exported to the European market. “Our orders have increased, but due to the impact of the depreciation of the euro, profits have declined.”
The trend is hard to say optimistic
According to calculations by the HSBC Research Department, for every 1 percentage point increase in the effective exchange rate of the RMB, my country’s foreign trade exports will decrease by 1.5%. As of the end of March, the nominal exchange rate and real effective exchange rate of the RMB had increased by 12.2% and 11.9% year-on-year respectively. Excluding costs such as labor and raw materials, the appreciation of the RMB alone is equivalent to a 10% increase in costs for foreign trade companies.
Industry insiders believe that most of my country’s traditional labor-intensive industries have sufficient market competition and low industry concentration. The average profit margin of export products is 3% to 5%. The rapid appreciation of the RMB and frequent fluctuations are not conducive to stable revenue of enterprises.
Wang Desheng also said that since the continuous appreciation of the RMB in 2008, the company has been in a state of loss. The appreciation of the RMB is very detrimental to export-oriented enterprises. “We hope that the RMB can depreciate moderately to alleviate the current difficulties of enterprises.”
However, considering the ongoing need for capital account opening and RMB internationalization, the market currently generally expects the RMB exchange rate to remain stable.
In this regard, experts said that the bearish yen may be a long-term trend. Foreign trade companies should respond in advance. For exports, they can choose to settle in RMB, lock in exchange rates, etc. At the same time, the added value of export products should be increased and the impact of labor costs should be reduced.
Ministry of Commerce spokesperson Shen Danyang also previously stated that the Ministry of Commerce encourages financial institutions to develop more exchange rate hedging products, and also recommends that enterprises further strengthen exchange rate risk management and use more exchange rate hedging tools to expand the scale of RMB settlement and enhance response Awareness and capability of exchange rate risks.