What will happen to exports if the RMB continues to decline?

What will happen to exports if the RMB continues to decline?

On June 26th, the offshore Chinese yuan fell below 7.23 against the US dollar, setting a new low since November last year, with a daily drop of over 150 basis points. The spot exchange rate of the Chinese yuan against the US dollar fell below the 7.20 mark at the beginning of trading on the 26th, and then further declined, successively falling below the 7.21, 7.22, and 7.23 mark. At one point during the day, it fell by more than 350 basis points.

Since the beginning of this year, the spot exchange rate of the RMB against the US dollar has depreciated by about 4%, and the offshore RMB against the US dollar has fallen by about 4.5%.

The continuous decline of the renminbi will undoubtedly give Chinese made prices a greater advantage and will also increase corporate profits in the short term. Under the trend of global demand contraction and slowing foreign trade growth, what will happen to China's exports due to the depreciation of the RMB?

The depreciation of the RMB will definitely have an impact, as customers are placing orders faster Ma Tongwei, General Manager of Shandong Ruitu Laser Technology Co., Ltd., told First Financial that their recent exports have increased by about 30% year-on-year. Customers are placing orders faster. However, due to the high-speed growth period of China's laser equipment industry segment, the 30% growth rate is still lower than expected in Ma Tongwei's view.

Liu Mingyang, General Manager of Yiwu Ouchi Import and Export Co., Ltd., told First Financial that the company's recent export growth has reached around 40%, and the depreciation of the RMB has indeed made the prices of Chinese exported products cheaper. However, the driving force for growth is not mainly due to exchange rates. If we want to estimate the impact of this downturn on order growth, he believes it is approximately 3% to 5%. The growth is also driven by the use of cross-border e-commerce and Big data to find cost-effective products that the market needs.

Regarding exchange rates, foreign traders have a greater desire for stability rather than volatility.

The most fearful thing is up and down. "As the deputy general manager of Zhejiang Ginza Luggage Co., Ltd., Jin Chonggeng believes that a lower RMB is good for enterprises in the short term, but not necessarily in the medium to long term. A stable exchange rate has always been the most anticipated by foreign traders.

With the opening up of the epidemic, the luggage industry has experienced a strong rebound, with orders for Ginza luggage increasing in double digits year-on-year. However, they will still lock in some funds. Due to the two legs of domestic sales and foreign trade, Jin Chonggeng stated that during the period of export slowdown, they have felt a relatively good recovery in the domestic demand market. "Currently, the domestic demand market for luggage is about to enter the peak season. They also plan to rely more on domestic trade this year.

A weaker renminbi will bring short-term benefits, but ultimately, it is market demand and industry competition that determine the quality of foreign trade business.