RMB Appreciation Leads To Bankruptcy Of Textile Companies

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The profits of China's textile companies are 3-5%, while the appreciation of RMB, rising raw material prices and labor costs have squeezed the profits of the textile industry, China Daily quoted Gao Yong, vice chairman of the China Textile Industry Association as saying on Tuesday.

In March, the Chinese government carried out the RMB stress test. The result showed that if the RMB appreciated by 1%, the space of the labor-intensive textile companies would be reduced by one percentage point, China Daily reported.

The sharp appreciation of the renminbi will cause millions of people to lose their jobs. China Daily quoted the Ministry of Commerce as saying that in China's textile industry, there are more than 20 million direct employees, and about 140 million people are related to cotton production.

In the 2005-2008 years, the exchange rate of RMB against the US dollar appreciated by 21%, which helped to drive up the price of China's textile products.

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In 2009, China's textile exports amounted to US $171 billion 300 million, accounting for 20% of China's total exports and 1/3 of the total textile exports worldwide.

The impact of RMB appreciation on us is sure to be obvious.

On the one hand, China's textile industry imports very little. Last year, the import volume was only 15 billion US dollars to 16 billion US dollars, so once RMB appreciation, the positive effect of import on textile industry is not very obvious.

On the other hand, the textile industry is a relatively high export industry. The appreciation of the renminbi has great influence on us.

Since July 21, 2005, the RMB has appreciated by 21%, and the entire textile industry has maintained a relatively high growth rate in the condition of RMB appreciation.

But from last year's situation, we lost nearly $18 billion in exports as a result of the financial crisis.

In general, thousands of workers may lose their jobs if the export volume is reduced by one hundred million US dollars. If the RMB continues to appreciate, our affordability will be lower and lower.

At present, the average net profit margin of the entire textile industry is around 3%~4%, and will not exceed 5%. If the appreciation of RMB exceeds 5 percentage points, a considerable number of small and medium-sized textile enterprises will face a disaster.

Many of these enterprises rely on exports, and it is not possible to sell them domestically at a time, so many of them simply stop production, and these small and medium-sized enterprises are the important units to absorb surplus labor force and promote social employment. Once bankrupt, the unemployment rate is bound to push up the unemployment rate to a certain extent and is unfavorable to social stability.

Generally speaking, gentle and small appreciation is easier for enterprises to digest.

Under the current circumstances, we call on the government to maintain the stability of the RMB exchange rate and provide a good financial environment for the survival and development of textile enterprises.

In addition, for the entire textile industry, we must speed up our industrial restructuring and adjust the proportion of domestic and foreign sales, and strive to expand domestic demand and promote domestic sales.

Finally, for the vast majority of textile enterprises, we must vigorously promote technology and product innovation, increase the added value of products, and enhance their bargaining power in the export market.

For example, for a brand enterprise like the famous Rugby evening dress, which is trusted by foreign customers and has bargaining power, the RMB appreciation will be more conducive to the development of its own business.