subject: Driving Factors For Chinese RMB [print this page] Driving Factors For Chinese RMB Driving Factors For Chinese RMB
As per different investigation it has been reported that Chinas exports of textile goods reached up to US$ 171.3 billion. And with this, China has covered up the position of doing one-third of the total global textile exports. The measured growth is around 20 percent in the year 2009. The export trade was gradually developed after implementing an open policy by Mainland (China) in the year of 1978. During 2009 the Mainlands all major foreign trade partners were under scarcity. Mainland exports mainly the necessity products such as textiles and clothing in U.S.A. market and restructuring the U.S.A. economy. Year 2009 was a disappointing year for export sector. In this year, China's textile and garment exports was cut down by 11 percent as compared to year 2008, which was around US$ 154.12 billion.
But after that, due to deteriorated demand from major markets, China's textile exports achieved a growth of 25.2 percent in December 2009, but apparel exports indicated a decline of 4.8 percent as compared to the previous year. Since April 2009, there was a silence in the fast turn down of Chinese textile exports to the Europe, U.S.A. and Japan, with the whole-year figures were standing at US$ 36.06 billion, US$ 26.4 billion and US$ 21.33 billion respectively. Even if orders show a growing trend, some apparel companies not dare to lift up the prices, as they are worries that customers will transfer orders to other regions.
From the present exports figures, it is obvious that RMB appreciation will impact positively, but by looking at the imports rates of textile industry, the positive role of imports is still not unclear. During 2009, Chinese textile industry imports were reported to be around US$ 15.5 billion. As the textile industry contributes relatively high proportion of exports, the impact of RMB appreciation will be great. Since, July 2005 total appreciation of Yaun is by 21 percent. For maintaining the relatively high growth rate, textile industry was under the situation of appreciating the Renminbi. But the situation changed in 2009. When the worldwide exports decreased by 100 million US$, Chinas exports lowered down by US$ 18 billion. If the Yaun has risen more than five percent, a significant number of small and medium scale textile industry firms will face disaster as the average net profit margin of such industry not more than five percent. Many small and medium enterprises (SMEs) organization depends on exports, so lot of stop production altogether closed; household / local market is not likely to change overnight. Also these SMEs take in the surplus manpower is to promote the employment of the important social unit. Generally flat, small step appreciation of the organization is more easily digested as once the closing is bound to a certain level, and pushed the unemployment within the rate is not conducive to social stability.
Chinese RMB exchange rate was affected by the global crisis in 2008. RMB rose quicker with bigger margin against US$. In April 2005, RMB exchange rate was around Yuan 8.8244=1US$, In June 2005, RMB exchange rate was around Yaun 8.2765=1US$, around 17.5 percent depreciation of US$, was reported against the Yuan and around 21.3 percent depreciation of US$ was reported against the renminbi.
On 21st April 2010, RMB exchange rate was around Yuan 6.8254=1US$ and on 27th May 2010, it was around Yuan 6.8297=1US$, Thanks to special attention on import and export business of cotton and textile industry. The opening of the China-ASEAN Free Trade Area is expected to boost China's textile and garment exports. China's textile and garment export industry is likely to see growth in both revenue and profits this year, but the gains likely not more than ten percent. It has been predicted that by the end of this year, RMB exchange rate will be appreciated by another 3 percent. RMB exchange rate may be reaching up to Yuan 6.62=1US$.
In the present industrial situation, for the survival and development of textile based industries, it is very important to keep the RMB exchange rate stable. By keeping the RMB exchange rates stable China can provide sound financial environment. Not only that, it also needs to speed up the industrial restructuring and correction in many things like export ratio, hard work to develop domestic / local demand. All of these are not possible without Government support.
With the government support, textile industries also require to accept the upgraded technology for improving the products quality, by this way product value as well own export market can be improved.
