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Insight | Time:Nov 7 2016 8:59AM
RMB exchange rate fluctuations impact on textile and apparel exports
 
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Since 2015, Chinese yuan continued to depreciate against US dollar and the devaluation speeded up in 2016. Till end Oct 2016, the central parity rate of the Chinese yuan against the USD weakened to around 6.78, recording a six-year low.

Though the Central Bank of China stated that it would keep the yuan exchange rate basically stable at an adaptive and equilibrium level and no basis was seen for the continual devaluation, market insiders considered that the pressure on the yuan devaluation was likely to increase, on concern about the possibility of Feb to raise the interest rate in Dec, sluggish economy in euro zone and high domestic real estate price. Then, What are the stimulative effects of yuan devaluation on China’s textile and apparel exports? How about the two’s correlation?

I. Monthly textiles export and RMB exchange rate:

In recent years, RMB devaluation speeded up, weakening from 6.11 to 6.78, while textiles exports witnessed no big change.
  Summit of textile exports Summit of RMB exchange rate
2014 $10.556bln in Apr 6.45 in Dec
2015 $10.045bln in May 6.45 in Dec
Jan-Sep, 2016 $10.246bln in Aug 6.68 in Jul

It can be figured out there is no direct relation between textile export value and RMB exchange rate.

II. Monthly apparel exports and RMB exchange rate

Apparel exports also saw no corresponding or regular volatility with RMB exchange rate.
  Summit of apparel exports Summit of RMB exchange rate
2014 $20.57bln in Aug 6.45 in Dec
2015 $19.087bln in Aug 6.45 in Dec
Jan-Sep, 2016 $17.686bln in Aug 6.68 in Jul


So, looking from the monthly textile and apparel exports, the sharp depreciation of RMB did not have direct stimulus for the exports, at least no relative volatility appeared.

III. Monthly textile and apparel exports and RMB exchange rate

In recent years, especially after the second half year of 2015, the devaluation of RMB kept on, weakening from 6.11 to 6.78, with a depreciation of over 10%, while textile and apparel exports also witnessed no regular relation with it.
  Summit of textile and apparel exports Summit of RMB exchange rate
2014 $30.533bln in Aug 6.45 in Dec
2015 $28.824bln in Aug 6.45 in Dec
Jan-Sep, 2016 $27.932bln in Aug 6.68 in Jul


Textile and apparel exports have no correlation with RMB exchange rate with their own periodical operation rules and seasonality.

IV. Yearly textile and apparel exports and RMB exchange rate

The chart showed that the textile and apparel exports presented inverse correlation with RMB exchange rate. In 2009-2014, textile and apparel exports climbed up year by year, while RMB exchange rate stepped lower. In 2014, textile and apparel exports reached the highest at $298.49bln, and the RMB exchange rate firmed to 6.1429 against US dollar. In 2015-2016, despite of sharp devaluation, textile and apparel exports did not increase further, but decreased for two years.

Therefore, the yearly textile and apparel export value showed obvious inverse correlation with RMB exchange rate. When the exports decreased sharply, the RMB exchange rate was devalued quickly, indicating that the policy’s support on exports. If there is no sharp depreciation of RMB, the textile and apparel exports may see larger decrease.

V. Correlation between textile and apparel exports and RMB exchange rate
Correlation coefficient:
2014 2015 2016 2009-2016
-0.00075 0.0693 0.0524 -0.9638

Owing to flat textile exports and less than 40% in total textile and apparel exports, the highest level of textile and apparel exports were in accordance with that of apparel, which was in Aug for three consecutive years from 2014 to 2016.

China’s textile and apparel exports are mainly settled by US dollar. Though the devaluation of RMB against US dollar is good for exports, actually, the direct impact is limited and no consistency is seen.

In terms of yearly textile and apparel exports and RMB exchange rate, the exports are slanting better when the RMB is appreciated, while the exports are worse when the RMB is depreciated.

Under current market circumstance, textile and apparel exports depend more on supply and demand, especially on the recovery of overseas demand and market prosperity.
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