Textile sector hit by rising
yuan BEIJING - China's textile
manufacturers, hit by the strengthening of the
yuan against the US dollar, are bracing themselves
for more losses, with further currency
appreciation expected in the coming months.
Barry Zhang, senior manager of Shanghai
Foreign Trade Co Ltd's textiles department, said
if the currency continues to grow against the US
dollar, his department's sales would fall 3-5%.
"That will mean our year's hard work will come to
nothing," said Zhang.
The textile industry
only manages an average profit margin of 3%,
according to a recent report
by the National Development and Reform Commission.
China allowed the yuan to appreciate by 2%
against the greenback in July last year, when the
exchange rate stood at about 8.11 yuan to US$1.
Since then, the yuan has been moving gradually
upward. The appreciation took on a new intensity
last week when the yuan exchange rate against the
greenback hit record highs between Tuesday and
Thursday. After Friday's dip, the yuan hit another
record high this Monday, at 7.9499 against the US
dollar.
Many economists predicted that
this appreciation trend is likely to continue,
rising by another 3% against the US dollar to hit
7.72 over the next 12 months. Top Goldman Sachs
economist Sun-Bae Kim has made an even bolder
prediction, saying the yuan would rise 6% to 7.5%
against the greenback in 12 months.
Given
the yuan's continuous appreciation, the only thing
Zhang can do now is transfer the exchange rate
burden to importers abroad.
"For new
orders, we can take the costs into account and
raise our prices," Zhang said. "But if the yuan
continues to go up at an unexpectedly high rate,
it will still put us at risk."
Like Zhang,
most of the country's textile and garment
exporters have chosen to add the cost to their
prices.
"If the appreciation is not very
sudden, it should not have a serious impact on
us," said Yan Haiping, deputy general manager of
Ningbo Youngor Import and Export Co Ltd.
Cao Xinyu, vice-chairman of the China
Chamber of Commerce for Import & Export of
Textiles, said the yuan's appreciation makes it
even more urgent for textile and garment companies
to speed up the restructuring of their exports.
"China has for 12 years been flooding the
world market with one-fourth of the world's
textile exports," Cao said. "If Chinese exports
continue to grow in quantity, the consequences
will be unimaginable."
