On May 11, the central parity rate of RMB against the US dollar was reported at 6.7290 yuan, down 156 basis points from the previous trading day, down for four consecutive days, reaching a new low since mid October last year. This has brought varying degrees of impact to import and export enterprises, and it is more urgent for enterprises to strengthen exchange rate risk management.
Bring certain impact to enterprises
Since the middle and late April, the RMB exchange rate against the US dollar has gone out of a wave of rapid decline. From April 19 to 29, the central parity rate of RMB against the US dollar was adjusted down to 2457 basis points. On May 11, the central parity rate of RMB against the US dollar has been reduced by 4276 basis points compared with the year low of 6.3014 on March 1.
Generally speaking, the depreciation of RMB can bring benefits to enterprise exports. However, Ren Peixian, assistant to the chairman of Liaoning chaopeng Clothing Co., Ltd., admitted in an interview with the reporter of International Business Daily that the company is mainly engaged in garment export business such as tooling and outdoor clothing. The depreciation of RMB can indeed reduce the exchange cost of enterprise exports, but customers have also increased the intensity of price reduction. Once the product price is lowered, it is difficult to callback. Therefore, the short-term sharp depreciation of RMB is limited to the benefit of enterprises. Moreover, the more prominent problems currently encountered by enterprises are the shrinking of external demand, the reduction of new orders, and the limited benefits brought by the devaluation of the RMB.
This is not an example. Many export enterprises said that the RMB depreciates sharply in the short term, and customers often negotiate with their advantageous position in the face of cost pressure. Industries or enterprises with low voice are under great pressure to reduce prices. In addition, although the devaluation of RMB is beneficial to enterprises to reduce prices and open up new orders, affected by the epidemic, it is difficult for enterprises to participate offline, and the benefits are restrained.
For import enterprises, the depreciation of RMB means that the exchange cost increases in the short term, which brings pressure to enterprises. This can also be seen from the foreign trade data. According to the latest data released by the General Administration of customs, China's imports increased by 5% year-on-year in the first four months of this year, lower than the export growth rate of 10.3%, and the gap between import growth and export growth further widened. To some extent, this is related to the change of RMB exchange rate.
There is a foundation for the exchange rate to remain relatively stable
Compared with the current market, enterprises are more concerned about the long-term trend of RMB exchange rate, because it is related to the enterprise's order receiving and pricing strategy.
Wen bin, chief researcher of China Minsheng Bank, said that the main factor for the recent devaluation of the RMB is the continuous intensification of inflation in the United States this year, the Federal Reserve's interest rate hike, the start of the table contraction process, the enhancement of market expectations, and the continuous rise of US bond yields and US dollar index. In this context, the depreciation of the RMB against the US dollar is a normal response. Moreover, from the perspective of a basket of currencies, the value of RMB remains stable on the whole.
"The recent devaluation of the RMB has also been affected by the market's expectations of economic fundamentals." Wang Jianhui, a senior researcher in the industry, added to the reporter of the international business daily, "first, the domestic epidemic has many points, a wide range and frequent occurrences, which makes the market have cautious expectations. Second, the GDP grew by 4.8% in the first quarter. Considering the impact of the epidemic on the economy will lag, the market is more cautious about the expectation of the second quarter and release the mood in advance."
For the trend of RMB exchange rate, Wen bin expects that the monetary policy of the Federal Reserve will be further tightened and the interest rate spread between China and the United States may be upside down. In this case, the RMB exchange rate against the US dollar may continue to fall. However, it should also be noted that China's foreign trade surplus is still large, and direct investment will maintain a net inflow. From the perspective of balance of payments, there is a solid foundation for the stability of the RMB exchange rate.
Feng Bai, a researcher at China Minsheng Bank, believes that the fundamentals of China's strong economic toughness, great potential and long-term improvement have not changed. At the same time, recent policies continue to increase support for steady growth, which will help stabilize market expectations and boost market confidence. In this context, the RMB exchange rate is expected to remain basically stable.
Enterprises should deal with exchange rate fluctuations
In the face of risks and pressures, Wang Jianhui suggested that import enterprises adjust their business. For example, if they transfer the source of imports to areas with small exchange rate fluctuations, they can also consider replacing the varieties of imported products to try their best to reduce the pressure. At the same time, enterprises can establish risk hedging mechanism through bank hedging and other financial products. In addition, Chinese enterprises can use RMB more for settlement when cooperating with enterprises from countries along the "the Belt and Road" to avoid exchange rate risk to the greatest extent.
In an interview with the international business daily, Wen Bin said that in the next stage, the exchange rate trend of RMB against the US dollar will maintain two-way fluctuations at a reasonable and balanced level. Foreign trade enterprises should make flexible use of financial instruments and enhance the ability of exchange rate risk management while adhering to the main business and accelerating the improvement of market competitiveness. "Both import and export enterprises should pay attention to exchange rate risk management. Enterprises can take three measures: first, establish the concept of 'risk neutrality' of exchange rate and do a good job in exchange rate risk management. Second, flexibly use a variety of exchange rate risk avoidance tools, including forward, swap, futures and other products, to do a good job in exchange rate risk avoidance. Third, more use of RMB valuation and settlement in cross-border trade and investment."
+86-538-5073088
