Three major boosts to textile and clothing trade from the inclusion of RMB in the basket
Recently, issues related to the RMB have once again become the focus of attention in manufacturing industries such as fabrics and workwear.
There are three reasons: First, on September 20, the People’s Bank of China issued an announcement authorizing the New York Branch of the Bank of China to serve as the U.S. RMB clearing bank . This not only marks a new level of Sino-US financial cooperation, but is also another important milestone in the process of RMB.
As a large economy, the U.S. market has always been a battleground for military strategists. The establishment of the RMB clearing bank will further facilitate the use of RMB and cross-border transactions in the United States, and promote Sino-US two-way trade, investment and economic cooperation to a new level.
Second, on October 1, the RMB was officially included in the Extraordinary Drawing Rights (SDR) of the International Monetary Fund (IMF). Paving the way for the RMB. The RMB has officially joined the SDR currency basket, which means that both the IMF itself and its 189 member countries theoretically recognize the RMB as a reserve currency.
Third, as industries and capital go abroad through the “One Belt, One Road” initiative, the RMB has also accelerated its pace. Experts pointed out that the population of countries along the “One Belt and One Road” accounts for 60% of the total population and nearly 30% of the total economic volume. The “Belt and Road” strategy will help form a “RMB zone” in this long-span economic corridor.
For example, in December 2015, the RMB-Somoni exchange rate listing transaction was successfully held. Enterprises, individuals and banks in my country’s Xinjiang and Tajikistan can use their own currency and the other country’s currency in financial settlements such as trade settlements. This is also an important sign that Xinjiang actively carries out economic and financial cooperation with Tajikistan and serves “going global” enterprises. .
For another example, in September 2015, the Kashgar region of Xinjiang successfully launched the inter-bank cash exchange rate trading of RMB and Pakistani rupees, and The launching ceremony was held at Bank of China Kashgar Branch. This will not only provide convenient conditions for the settlement of trade and investment funds between New Zealand and Pakistan, but will also effectively expand the transaction channels for customers of both parties and expand the scope of financial cooperation.
Recently, a reporter from China Fabric News exclusively interviewed Liang Yanfen, director and researcher of the Economic Research Institute of the Ministry of Commerce Research Institute, on the above 3 financial events to explore their boost to Chinese fabrics and workwear export companies.
Boost a stable overseas assets
According to different degrees, currency can be divided into three levels: as a pricing and settlement method for international trade; as an international investment and international currency. A tool for borrowing and lending; used as one of the currencies of other countries’ foreign exchange reserves.
What proportion of the RMB will be included in the International Monetary Fund this time? Liang Yanfen explained to a reporter from China Fabric News: “SDR is a reserve asset and accounting unit created by the IMF. Before the RMB was added, it was mainly composed of four currencies: the US dollar, the euro, the Japanese yen and the pound. They were in the SDR currency basket. The shares of the US dollar are 41.9%, the euro is 37.4%, the pound is 11.3%, and the Japanese yen is 9.4%. After the entry of the RMB, the share is 10.92%, and the shares of the US dollar, the euro, the Japanese yen, and the British pound are adjusted accordingly to 41.73%, 30.93%, 8.33% and 8.09%, respectively 0.17, 6.47, 3.21, and 1.07 percentage points lower than before. According to IMF rules, the weight of basket currencies in the SDR is not static. As the use of currencies in trade and finance changes, The IMF adjusts each currency’s share of the SDR every five years.”
Regarding the inclusion of the RMB into the SDR as an international reserve currency and its positive effect on Chinese fabric workwear export enterprises, Liang Yanfen learned from the two Predictions were made from several aspects: “First, joining the SDR means that the RMB has gained international recognition and the credit endorsement of the IMF. For China’s fabric workwear manufacturing industry, it has gained new credit support and guarantee in international financing, which will help China overseas financing of enterprises; secondly, joining SDR will help enhance market confidence in the RMB, stabilize market expectations, further expand the use of RMB in cross-border trade and investment settlement, and is beneficial to the stability of the RMB exchange rate, especially for Chinese fabrics The assets of workwear companies deploying overseas will be stable and assisted.”
Boost 2 to reduce export costs
Since the United States, a large economy, has established itself as an offshore RMB center, how many aspects will its export advantages to Chinese fabric workwear companies be reflected in?
In this regard, Liang Yanfen told the reporter of “China Fabric News” that the RMB offshore market is an important area to accelerate the process of promoting the RMB. A close match between supply and demand is needed to build a website. The United States has established itself as an offshore RMB center. First, it meets the needs of the development of economic and trade relations between China and the United States. Second, it is a stable, transparent, lively and low-risk exchange between the U.S. offshore market and the RMB onshore market, which is conducive to smooth exchanges. It will reduce the risk of RMB cross-border capital movements and the turbulence of the domestic capital market, thereby helping to reduce the cost of China’s manufacturing exports.
The adoption of RMB pricing and settlement will reduce the transaction costs of exporting fabric workwear to a certain extent. The main manifestations are as follows: 1. It is to speed up export settlement and improve the efficiency of capital settlement. With the improvement of supporting measures for RMB cross-border settlement, the RMB cross-border trade settlement process will become more convenient and efficient. The second is to avoid exchange losses and save handling fees and foreign currency hedging costs.
Liang Yanfen pointed out that a stable external environment and strong financial conditions will become the greatest competitive advantages for Chinese fabric workwear export companies.
However, it should also be noted that the current pricing and settlement capabilities of the RMB are particularly limited, and the U.S. dollar, euro, etc. are still the main currency of my country’s fabrics. An important settlement currency in exports. From the current point of view, the positive effect of RMB on the export of fabrics and workwear has not yet been fully demonstrated.
Boost three to reduce exchange rate risk
Before the implementation of the RMB cross-border foreign trade settlement pilot program, all exports of fabrics and workwear were denominated and settled in foreign currencies, with separate export collection and export. Export settlement is completed in two steps. If the foreign exchange pricing and settlement method is adopted, the short-term substantial depreciation of foreign exchange will bring greater exchange losses to the export of fabrics and workwear.
The post-RMB exchange rate will have a positive impact on the export of fabric workwear, such as reducing exchange rate risks. However, the development of this positive effect is subject to whether fabric workwear export companies have pricing power in export trade negotiations and the extent of the RMB.
To this end, China is actively promoting RMB settlement in the “Belt and Road” countries, and Xinjiang, Pakistan, Tajikistan and other countries bypass the US dollar. Direct settlement, what are the benefits to Chinese fabric workwear export companies? In what aspects is convenience reflected? What are the motivations for investment and cooperation in countries along the “One Belt, One Road” initiative for Chinese fabric workwear companies?
Regarding these issues, Liang Yanfen summarized three points to the reporter of “China Fabric News”.
First, “One Belt, One Road” is a grand strategy and a long-term strategy. The construction projects require huge funds and a long construction period. Many countries along the Belt and Road are experiencing economic difficulties and political instability. Promoting RMB settlement can at least avoid or reduce exchange rate risks.
Secondly, for China’s fabric workwear and other manufacturing industries, we can also be aware of and controllable risks, such as budgeting Fund stability, fund payment and transaction convenience, etc.
Third, for the government, taking the RMB’s inclusion in the SDR as an opportunity to promote the Silk Road Fund, the Asian Infrastructure Investment Bank, and the NRIC Bank As well as bilateral and multilateral financial institutions such as the European Bank for Reconstruction and Development, in which my country has a stake, use RMB as the main investment and financing currency, improve the RMB financing support methods for the “Belt and Road” and international production capacity cooperation, further expand the use of RMB in two-way investment and foreign aid, and then Promote the adoption of RMB pricing and settlement of bulk commodities in major trading partner countries.
It can be seen that the adoption of RMB denominated settlement relatively reduces the pricing costs caused by foreign exchange exchange rate fluctuations, and can be locked in at one time during trade negotiations. price, while also avoiding corresponding exchange losses.
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