Exchange rate turbulence textile exports were again "warm boiled frog"

Business Club September 7 Since entering August, the *** exchange rate against the US dollar has entered the "6.3" era. As most of the textile export orders are settled in U.S. dollars, the appreciation of *** causes the profits of textile export enterprises in Hebei Province to decline, which will cause a greater impact. According to an industry source, the appreciation of *** is like a “hot boiled frog” due to the profit squeeze from textile exports. Coupled with the rising cost of raw materials and labor costs in the context of domestic inflation, textile export enterprises in the province Profit margins are getting lower and lower, and this kind of low-profit status has led many companies to create an embarrassing situation in which “there is no single point”.

Settlement with U.S. dollar exchange rate fluctuations

On September 1, according to the relevant exchange rate data, one dollar is equivalent to ***6.3765 yuan.

It is understood that since August, the *** has trod against the U.S. dollar and even broke 6.44, 6.43, and 6.42, entering the "6.3" era. This makes the textile export enterprises that are extremely sensitive to exchange rate changes more annoying.

"We have such a large influence on such enterprises," said a person from a major textile import and export company in Hebei, because they are simply doing foreign trade, receiving goods at one end, and exporting at the other end, unlike some production enterprises that can collect income from the upstream. Links such as cotton and textiles are used to ease the profit impact caused by exchange rate changes. He said that at present, more than 90% of the company's orders are settled in U.S. dollars, and the impact of exchange rate changes on them can be imagined. Although many of the company's export operations are targeted at countries using currencies such as the Australian dollar, Canadian dollar, and euro, on the one hand, most customers are more accustomed to using the world currency such as the US dollar. On the other hand, other currencies also have problems with exchange rate fluctuations. Use US dollars to settle.

"We can only minimize losses by locking the exchange rate, or try to settle in other currencies," he said. The so-called "locked-in exchange rate" means that the enterprise notifies the bank to lock the exchange rate at the time of signing the bill, and executes the exchange rate at the time of the actual settlement of the purchase price to avoid the loss caused by exchange rate fluctuation to the enterprise.

Corporate profit margins shrink dramatically

However, how much does the exchange rate change affect the textile export industry? According to the "July Hebei Textile and Clothing Association Statistical Report," it shows that every 1% increase in the exchange rate of the US dollar against the U.S. dollar will result in a 2% to 6% drop in Hebei's textile export profits.

Specific to the company, another person from the textile import and export company in the province told reporters that in the same period last year, the exchange rate of *** against the US dollar was about 1:6.7, now it has become more than 1:6.3, equivalent to 1 US dollar being “cheap”. 0.3-0.4 yuan***. And 70%-80% of the company's orders are settled in U.S. dollars. "It was affected too much!"

“For example, if the profit rate at that time is calculated at 10%, then the change in the light exchange rate will dissolve 3% to 4% of them,” she explained, adding that the upstream fabric prices rose, workers’ wages rose, etc. The factors also relieved a considerable part of their profits, so that the already good profit margins shrank dramatically.

The woman said that at present, the upstream and downstream industries are squeezing the profits of textile export companies. They are just like cracks. Most of her provincial counterparts that she knows are supporting.

The reporter learned from the Hebei Province Textile and Apparel Industry Association that Hebei Province, as a major exporter of textiles and garments, does have a lot of import and export companies that are affected by the appreciation of the renminbi.

There is a single dare to take over thanks to many

It is understood that this situation has caused many textile export companies to fall into the "wonder alone".

The above-mentioned woman introduced that this state of low profit leads to a reduction in the ability of the company to resist risks. Sometimes, as long as the exchange rate changes slightly, an order of a company may be strenuous and may not make much money, or even make a loss, and the more orders are the more losses. "This year, there are indeed many cases where the list is not dare to meet," she lamented.

It is understood that the current slump in textile import and export companies, in addition to changes in exchange rates, is also a major factor in rising costs in the context of domestic inflation. In recent years, the costs of cotton, transportation, and labor in the domestic market have continued to rise, and the prices of foreign orders have not increased correspondingly.

Basically, the export of textiles has become awkward due to changes in exchange rates and rising costs. Once again, it has revealed that Hebei Province has low value-added textile products and low profitability. According to industry insiders, although Hebei is a province where textiles are exported, it cannot be considered as a textile province. Exports are mainly primary products such as towels, blankets and clothes. Accelerating the adjustment of textile export structure, phase-out primary products, and quickly producing high-end products with high profit margins are the long-term plans for textile companies in the province to evade exchange rate risks.