Foreign trade enterprises difficulty of RMB appreciation: the more orders, the heavier the loss!

category:Finance
 Foreign trade enterprises difficulty of RMB appreciation: the more orders, the heavier the loss!


On November 18, the middle rate of RMB exchange rate in the inter-bank foreign exchange market rose to 6.5593 yuan to 1 US dollar, officially opening the 6.5 yuan era. At the same time, the onshore and offshore RMB exchange rates against the US dollar have reached new highs in recent two and a half years. Compared with the onshore low of 7.1765 yuan against the US dollar on May 27, the RMB rose by more than 6000 points, or 8%.

It is understood that foreign exchange futures have not yet been listed in the mainland futures market, and enterprises foreign exchange hedging mainly uses forward settlement and sales of foreign exchange with banks to hedge exchange rate risk. However, after the rapid appreciation of RMB in a short period of time, many enterprises forward settlement of foreign exchange has become invalid.

In order to reduce the losses of foreign trade enterprises, recently, Wang Chunying, deputy director of the administration of foreign exchange and spokesman, called on foreign trade enterprises to actively prevent exchange rate risk and establish a risk neutral concept against the background of enhanced bi-directional fluctuation elasticity of RMB exchange rate.

Wealth shrinking

At present, the production capacity of overseas factories has significantly contracted due to the impact of the epidemic, which makes Chinas products have strong demand in the world. With more orders, revenue and profits have shrunk sharply in the interest rate changes, which is a huge impact on enterprises.

If there is an order, there will be production, and if there is a production enterprise, the vitality will be restored. At the beginning, the order was only slightly increased. In recent months, the order volume has increased greatly. We almost all work overtime to catch up with orders. Li Yong said.

Especially in the past five years, the exchange rate of RMB against the US dollar has reached a low point. According to the calculation, in recent months, Li Yongs enterprise revenue has increased about three times.

But in the days that followed, Li Yong watched the yuan go up and the dollar in his bank account shrank. It was unacceptable to him.

The RMB exchange rate has fluctuated too much this year. Although it is basically based on the long-term exchange rate, it will still have an impact on enterprises if it reaches the low point of the US dollar at the high point agreement. Li Yong said.

An industry insider said that for the relatively small-scale foreign trade enterprises in Jiangsu and Zhejiang, the best survival rate is 7. After reaching 6.7, foreign trade enterprises have little profit. Therefore, when the appreciation rate of RMB exceeds the psychological expectation of foreign trade enterprises, many foreign trade enterprises accounting profits will be compressed. If the owners of enterprises value the book losses, and then vacillate in delivery and exchange, it will lead to Book panic; and long-term non exchange of foreign exchange waiting for RMB devaluation will easily cause the embarrassment of lack of liquidity.

For big companies, the losses are more obvious. Recently, many listed companies on the exchange interactive platform said that the appreciation of the RMB exchange rate caused the exchange loss of the company, thus dragging down the net profit.

In the third quarter of this year, Hikvision, the leading security industry in China, suffered an exchange loss of about 500 million yuan, while in the same period last year, Hikvision had an exchange gain of about 400 million yuan. At an investor relations event held in November, Hikvision said that the appreciation of RMB exchange rate in the third quarter was too fast, and the speed and intensity of change were beyond the control of enterprises. Any company involved in foreign trade could hardly fully absorb the impact of RMB exchange rate appreciation.

One embarrassment is that at present, the foreign exchange hedging channels of mainland enterprises are still very single and their hedging ability is limited. The most important thing is that with the appreciation of RMB, the orders of foreign enterprises are often accompanied by price reduction. Although the decline of orders is not obvious due to epidemic factors, the current situation of more work and less gain still makes enterprises fall into difficulties.

Multi means to deal with the impact of appreciation

In the context of the epidemic impact and global quantitative easing policy, the stability of the financial system is more and more important for economic recovery. The stabilization and recovery of RMB is conducive to stabilizing market sentiment, attracting cross-border capital inflow, and playing an important role in stabilizing the domestic financial situation. Wang Youxin, a researcher at the Bank of China Research Institute, said.

In order to minimize the impact of RMB appreciation on foreign trade enterprises, the regulatory authorities cancelled the risk reserve for long-term purchase in early October, and then faded out the counter cyclical factor of the middle price. In addition, in recent two months, the regulatory authorities have approved more than $15 billion of QDII (qualified domestic institutional investors) quota, hoping to ease the rise of RMB through macro prudential measures to return to neutrality and relax capital outflow channels.

Tan Yaling, President and chief economist of the China Academy of foreign exchange investment, also suggested that the government should introduce a coordination mechanism. For example, when exchanging US dollars for RMB, banks should provide support channels to integrate the parameters of 27 countries currencies into the foreign exchange settlement of enterprises; when trading with Southeast Asia, enterprises should be encouraged to trade in local currency to avoid exchange rate risk; and the government could also provide subsidies, subsidies, and so on Tax reduction and other ways to support foreign trade enterprises to deal with exchange rate risk.

However, in the view of Li Chao, chief economist of Zhejiang securities, there is still room for further appreciation of RMB exchange rate. The over expected appreciation may come from the Centralized Settlement of foreign exchange in the real sector and the US dollars over expected downward trend; the over expected depreciation may be due to geopolitical factors, but the probability that these situations will occur and lead to a significant exchange rate overshoot is not very large.

Cheng Shi, chief economist of ICBC international, also believes that the RMB exchange rate is expected to experience a fast before slow appreciation process in the two-way fluctuation, and the US dollar RMB exchange rate is expected to drop to about 6.40 in the first half of 2021. It is expected to maintain a high level in 2021, and the RMB exchange rate is expected to remain stable for a long time. However, according to Wang Tao, chief economist for Greater China at UBS, the United States is still a variable. The trump administration may introduce some more measures against China. There are also some risks after the new administration takes office. It may also disturb the market in the short term and put pressure on the RMB exchange rate. Next, we hope that the exchange rate can be more stable, and do not fall sharply and rise sharply. For foreign trade enterprises, the impact is too big. Li Yong said that in any case, foreign trade enterprises should try their best to maintain the advantage of increasing orders in the impact of RMB appreciation, so as to win the first move for enterprise development. Source: China Times Author: Zhang Zhi, editor in charge: Wang Xiaowu_ NF

Cheng Shi, chief economist of ICBC international, also believes that the RMB exchange rate is expected to experience a fast before slow appreciation process in the two-way fluctuation, and the US dollar RMB exchange rate is expected to drop to about 6.40 in the first half of 2021. It is expected to maintain a high level in 2021, and the RMB exchange rate is expected to remain stable for a long time.

However, according to Wang Tao, chief economist for Greater China at UBS, the United States is still a variable. The trump administration may introduce some more measures against China. There are also some risks after the new administration takes office. It may also disturb the market in the short term and put pressure on the RMB exchange rate.

Next, we hope that the exchange rate can be more stable, and do not fall sharply and rise sharply. For foreign trade enterprises, the impact is too big. Li Yong said that in any case, foreign trade enterprises should try their best to maintain the advantage of increasing orders in the impact of RMB appreciation, so as to win the first move for enterprise development.