On May 12, the spot exchange rate of RMB against US dollar fell below 6.74, 6.75, 6.76, 6.77, 6.78 and 6.79 successively, and closed at 6.7900 at 16:30, down 626 basis points compared with the previous trading day. The closing price was the lowest since October 2020. The renminbi’s spot rate against the dollar briefly approached the 6.80 mark in overnight trading.
On May 12, the offshore RMB exchange rate fell below the 6.77, 6.78, 6.79, 6.80, 6.81 and 6.82 levels against the US dollar, down more than 550 basis points from the previous trading day. The offshore renminbi has fallen even more this year than the onshore market, falling more than 7 per cent.
Although the depreciation of RMB improves the profit margin of export enterprises, they hope that the exchange rate will be stable
For importers and exporters, the impact of exchange rate changes is more complicated. In general, a weaker yuan is a boon for exporters because the dollars they receive in settlement can be exchanged for more yuan. Although RMB depreciation can improve certain profit margin, the operation of enterprises is complicated and cannot be generalized.
Many listed enterprises involved in product export said that the depreciation of RMB can improve the profit of the foreign trade orders the company has undertaken, and will subsequently improve the competitiveness of the company’s product prices in the international market, which is conducive to new orders. However, the positive factors brought by the exchange rate have limited impact on smes. In the long run, large fluctuations in interest rates over a short period of time may actually create uncertainty about future orders.
Falling orders and rising costs are more pressing
Compared with the impact of exchange rate fluctuations, small and micro export enterprises are currently facing two more intractable problems, one is the reduction of orders, the other is the rise of costs.
From the perspective of macro data, the latest data released by The General Administration of Customs of China on May 9 showed that the total value of China’s trade in goods in April was 3.16 trillion yuan, up 0.1% year on year, which was 5.7 percentage points lower than that in March. Exports grew 1.9 per cent year on year, down from 12.9 per cent in March. Imports fell 2 percent, 0.3 percentage points more than in March.
From January to April, The total value of China’s foreign trade was 12.58 trillion yuan, up 7.9% year on year, 2.8 percentage points lower than that of the first quarter. Exports grew by 10.3% and imports by 5%.
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Post time: May-13-2022