Export shoes and apparel companies are in trouble due to RMB appreciation

Recently, Zhou Xiaonan, deputy general manager of Ningbo Huamei Wire & Cable Co., Ltd., appeared to have unusual anxiety. The reason is that the continuous appreciation of the RMB against the US dollar has made Zhou Xiaonan, who has been engaged in foreign trade business for several decades, to face the most difficult year since his career. Because of the continuous appreciation of the renminbi, although there is still a steady flow of goods to the rest of the world, a piece of clothing exported has earned 5 cents, 10 cents or more. “Even if the financial crisis last year was not that difficult,” Zhou Xiaonan said. Since September, the price of raw materials for cotton has risen so frequently that the cost has risen steadily, and the appreciation of the renminbi even worsens even if there is one. The list of piles was placed in front of the company and companies did not dare to pick them up.

Since June 2010, the exchange rate of the renminbi against the U.S. dollar has risen by nearly 2%. On September 21, the exchange rate of the renminbi rose to 6.7079, which was the highest since the exchange rate reform. In the eyes of the United States, the so-called appreciation of the renminbi is weak and has been overwhelmed by Chinese exporters. On September 22, Premier Wen Jiabao of the State Council said in New York that a 20% appreciation of the renminbi will cause serious unemployment problems in China and trigger social unrest.

Zhou Xiaonan said that in order to absorb costs, they only want to increase the price of overseas buyers, and the price increase of some products has reached 20%. For the increase in cotton prices, customers are relatively able to accept price increases, while the exchange rate costs increase, they choose to transfer orders to other countries or regions. Mr. Li, a large-scale toy exporter in Guangdong, was also empathetic. The export orders on hand were barely completed under the many years of network relations. Some partners also faced closure due to cost pressures, and they were able to close down. Overseas buyers’ crush on price, coupled with non-stop price hikes by toy factories, made the profit of his middleman thin like a piece of paper. The appreciation of the renminbi also took away his last profit. Recently, there were orders for next year to come to negotiate. Mr. Li also had to think twice before proceeding, and he dared not easily accept orders.

Recently, a number of export companies have stated that after the delivery of Christmas goods, the next step is how to take orders, and everyone is confused about this. Because of the increase in risk, companies have become cautious about accepting orders, and they will temporarily set aside orders for next year.

Wu Zhenchang, Chairman of Guangzhou Shinsin Shoes Co., Ltd. stated that companies adopting financial instruments to take forward exchange-locking measures to avoid exchange rate risks may be affected relatively little. However, the appreciation of the renminbi will increase the purchase cost of overseas consumers. Exports and orders are also presented. Good and bad situation.

The appreciation of the renminbi has hit some of the U.S. forces in the blow to China’s exports. For these forces that regard China as a potential competitor, China’s exports are undermined and weakened. This is a result they are happy to see. Ministry of Commerce International Mei Xinyu, a research fellow at the Institute of Trade and Economic Cooperation, said.