U.S. Federal Reserve Chairman Powell25 stated at the Jackson Hole Annual Meeting of Global Central Banks in Wyoming on the 25th that the Fed is prepared to further raise interest rates under appropriate circumstances .
In the current international economic environment, the Federal Reserve’s interest rate is a component that cannot be ignored. Every time the Federal Reserve raises or lowers interest rates, it will trigger a chain reaction, extending to the fields of trade and production, and having an operational impact on textile companies. .
Interest rates have been raised, and there is a “money shortage”
Currently, the U.S. federal funds rate target range is between 5.25% and 5.5%,In contrast, China11-year deposit benchmark interest rate has fallen again and again. Later, it was already 1.50%.
In the United States, rising interest rates have put tremendous pressure on domestic financial institutions, leading to bank failures one after another. Under such circumstances, the risks of some conventional financial products have increased dramatically, and large sums of money have flowed into the U.S. bond market.
More importantly, the U.S. dollar, as the most important currency in circulation in the world, plays the most important role in the process of international trade. The continuous increase in U.S. debt interest rates will cause a large amount of capital to flow into the United States, artificially creating a “money shortage”. People are unwilling to consume due to the pressure of life, so the number of European and American imports has dropped sharply.
There are even markets that clearly have demand but do not have enough U.S. dollar transactions. Textile people engaged in foreign trade in Southeast Asia, Africa and other places said that their foreign customers were very excited when they saw Chinese textiles and thought it would be a good idea to buy them back. They can definitely make a profit by selling it quickly, but they can’t get enough foreign exchange to import. A large amount of their country’s U.S. dollar foreign exchange flows back to the United States to buy U.S. debt.
Will a bigger impact come?
Continuous interest rate hikes will have a more profound impact on the market.
First of all, the most intuitive impact that textile people can feel is the exchange rate. While the Federal Reserve raises interest rates, the People’s Bank of China continues to cut interest rates in order to promote market vitality. The resulting interest rate differential has exerted great depreciation pressure on the RMB exchange rate.
Last year, the lowest exchange rate of RMB against the U.S. dollar exceeded 7.3, and subsequently rebounded to 6.8, but the U.S. dollar continues to be strong this year Since then, the exchange rate has recently fallen back to 7.2 and may fall below last year’s lowest point in the future. Fortunately, there are still many tools in the central bank’s policy toolbox. Although the pressure on the exchange rate is great, the overall pressure can be maintained within a stable range, and it is unlikely to happen like 97The exchange rate is on a roller coaster like the Southeast Asian crisis.
In addition, the impact on foreign trade exports will also be very obvious. The Fed’s interest rate hikes are tantamount to placing shackles on other countries and itself, artificially draining U.S. dollar liquidity. It is clear that the Federal Reserve is constantly printing money, but there is a lack of money in the market. At the same time, high interest rates will also increase the operating burden of enterprises, forcing them to adopt more conservative strategies and be unwilling to expand production. If the market vitality is insufficient, it will be difficult for residents to earn enough money. The price of daily necessities caused by superimposed inflation will rise, and life will be reduced. As the situation becomes more difficult, the demand for textiles naturally decreases.
More importantly, according to statistics, since the 20scentury80s, every time the Federal Reserve starts an interest rate hike cycle, 2-4 years, there will be a worldwide economic crisis. If we start from 2022, The crisis may occur from 2024 to 2026 years. Nowadays, the global economy is obviously under pressure. The United States, the European Union, the United Kingdom, Japan, South Korea, and even China, which has the strongest economy, have more or less encountered crises. These crises are constantly fermenting, and there may be a general outbreak in the future.
What can textile companies do?
For textile companies, there are basically two paths that the textile industry can take in the future.
The first is to make high-quality products.I am afraid that no matter how bad the economy gets, the working people will bear the biggest blow. The consumption power of the rich will not decrease, but will even increase. Therefore, the consumer demand for high-end textiles will still be there. However, the main problem in this road is the level of technology. Extremely demanding.
Secondly, it is high quality and low price, and takes the road of increasing quantity. Textiles, as one of the most basic needs in “clothing, food, housing and transportation”, will never die. What’s more, the markets in Central Asia, Southeast Asia, Africa, South America and other countries that are constantly developing now have great demand for high-quality and low-price textiles. This road The main problem is fierce competition, not only with domestic competition, but also with overseas emerging markets.
But no matter which path you take, in a bad economic environment, the first priority is to survive and ensure enough liquidity on hand to cope with the first wave of possible crises in the future. . If you get through it, you can see the rainbow.
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