Exchange rate fluctuations stimulate sensitive nerves in lions and apparel companies
On September 17, the USD/CNY exchange rate closed at 6.7260. Shishi’s foreign trade community observed that the central parity of CNY against the U.S. dollar has been rising for eight consecutive days, with a cumulative increase of over 700 basis points, hitting new highs continuously.
Shishi, an economically open city with strong international trade ties, saw its self-supported exports reach $868 million in the first half of the year. If this figure were doubled, it would amount to $1.736 billion. Based on the average rate of 6.7260 from last weekend, the total value of self-supported exports for the year would be approximately 11.6 billion yuan. Any significant fluctuation in the exchange rate can cause concern among Shishi’s export-oriented businesses.
The eight major industries in Shishi—apparel, footwear, communications and electronics, sports goods, pharmaceuticals, handicrafts, textiles, and agricultural and non-staple food processing—have annual export delivery values exceeding 100 million yuan. Among these, apparel and footwear are the most sensitive to exchange rate changes.
The textile and garment industry above designated size in Shishi reports annual exports surpassing 5 billion yuan, with an average monthly export value of about 500 million yuan. International trade still largely uses the U.S. dollar as the main settlement currency. The production and shipping cycle for each export order typically takes around two months. Therefore, if goods are in transit or have been settled in Hong Kong, or if companies have received payments but haven’t yet converted them, they will face losses due to the recent appreciation of the CNY (dollar depreciation).
Before September, the central rate of CNY against the U.S. dollar was hovering around 6.8. However, in September, the pace of appreciation accelerated sharply, moving from 6.8 to 6.7—a drop of 0.1 U.S. dollars. With an average monthly expenditure of 1 billion yuan in Shishi, and assuming the exchange rate remains stable, the export sector could see a loss of between 150 million and 200 million yuan due to the ongoing appreciation.
Shishi entrepreneurs are now paying closer attention to global exchange rate dynamics, alongside their daily operations. The U.S. is pushing for CNY appreciation, while the EU and many other countries also support it, placing the CNY under pressure to rise. Compared to previous years, the bargaining power of Shishi-made products has significantly increased, thanks to industrial upgrading. As product quality improves, the export market has shifted toward mid-to-high-end customers, where price sensitivity is higher. Although profit margins are narrowing, orders are not drying up.
Currently, Shishi’s export economy is operating with slightly more orders than capacity. However, there is one segment that remains unaffected by exchange rate fluctuations—the apparel spot market. For years, foreign buyers have habitually quoted prices in CNY in this market, making it a stable and predictable environment for traders.
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