Authoritative person: Local currency settlement has little impact on textile exports
Under the impact of the financial crisis, the international currency centered on the US dollar has been eclipsed. More and more people are boldly envisioning that new international currencies will stand out. Even if they cannot replace traditional international currencies such as the US dollar, they will definitely have a place. It was in this atmosphere that the RMB began its currency journey.
International currency has three main functions: first, as a currency for payment and settlement in international economic and trade; second, as a currency for investment and transactions; third, as a reserve currency. To this end, the Chinese government has recently been working hard to expand the “power territory” of the RMB. Chen Xingdong, managing director and chief economist of BNP Paribas Securities (Asia) Co., Ltd., said in an interview with reporters that the choice path for the realization of the RMB is clearly visible: first, it will become the settlement currency of trading partner countries, thereby realizing a regional currency, and then Toward currency.
However, he also believes that although the implementation of RMB settlement will help companies avoid exchange rate risks, it will have little impact on the export enthusiasm of the textile and garment industry. Completely different from the enthusiastic reception in border trade transactions, most textile and apparel export companies have a lukewarm response to RMB settlement.
Because China’s textile and apparel industry mainly faces the demand of the European and American markets, which are not included in the RMB settlement pilot in China, Hong Kong, Macao and ASEAN, and customers in the European and American markets are not very receptive to RMB settlement.
China has not yet opened up the free convertibility of RMB, which affects the willingness of foreign importers to hold RMB. The US dollar is still the preferred currency for import and export settlement. An owner of a private clothing company in Guangzhou told reporters that the company’s main export target is the European and American markets. He once tried to make requests for settlement in RMB, but was rejected by customers because RMB is difficult to convert in their countries.
Although the export business suffered a lot of exchange rate losses due to the continued rise of the RMB against the US dollar in the first half of 2008, US dollar settlement is still the only option for a large number of textile and garment export companies. In order to resolve exchange rate risks, many textile and apparel export companies still tend to adopt a traditional method – forward exchange lock contracts for large orders.
On the other hand, the textile and apparel industry is a typical labor-intensive industry, and Chinese textile and apparel companies generally have no bargaining power in international trade. In view of the buyer’s market faced by China’s exports, for many companies, the settlement method mainly depends on the needs of customers. If you want to proactively adopt RMB settlement to avoid exchange rate risks and realize structural adjustment and industrial upgrading of the textile and apparel industry to improve core competitiveness, it is also of great significance.
“Promoting RMB to become an international currency is a long-term process, and the trial implementation of RMB settlement is just the beginning.” Chen Xingdong said that in the face of the trial implementation of RMB settlement, everyone needs to have a process of preparation and acceptance, including China Government and importers and exporters. Whether the RMB is expected to become a freely convertible currency in the future, or at least become a freely convertible currency in some regions, has recently become the focus of experts and scholars at home and abroad.
Chen Xingdong believes that the trial implementation of RMB settlement is an expression of the Chinese government’s policy intention. Although RMB settlement is very popular in border trade transactions, this trial implementation of RMB settlement is an official public promotion and is of great significance. This trial of RMB settlement adopts a voluntary principle and is not mandatory, but it provides a new concept for all enterprises: pricing in RMB and trading in RMB. This change in concept is expected to push the RMB onto the international currency stage with the implementation of the RMB settlement pilot. AAFNJKIYO9P
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