Chinese textile exporters are turning to non-U.S. dollar currencies in pricing and settlement to offset rising losses from the yuan's appreciation against the greenback.
The majority of more than 1,000 textile producers said they had switched to other currencies in a survey by Web Textiles.Com, a major textile information website.Those still pricing their exports in U.S. dollars had raised the yuan's exchange rate against the dollar in their contracts, or cut the validity term from up to two months to just a week, according to the website.
The Chinese currency has risen more than 4 percent against the dollar this year, with its central parity rate setting a high of 7.002 against the dollar on Monday. The continuous appreciation, together with rising costs from export tax rebate cuts and more expensive labor and raw materials, has squeezed profits in China's textile industry.
A survey by China National Textile and Apparel Council last month showed that two thirds of the textile companies surveyed reported an average profit margin of 0.62 percent.
Raising prices is another choice for exporters, but the risk is losing market share amid fierce competition, said website editor-in-chief Wang Qianjin. "We're losing out to neighboring countries like India, Pakistan and Vietnam, whose textile exports are now much cheaper than ours," said Wang Gongzhu, general manager of the east China-based textile producer Huamao Group. "We surely want the prices up, but we have little room to move."
The yuan's exchange rate will be kept "basically stable at a reasonable, balanced level" with more flexibility, Monday's Financial News quoted Yi Gang, vice governor of China's central bank, as saying.
A rising yuan could stimulate industrial upgrading and innovation, said Yi, who added its impact on exports and employment should be considered.
Chinese textile and garment exports in the first two months rose only 9.6 percent from the same period last year, compared with previous year-on-year increases of about 20 percent.
