How Does The Fed Raise Interest Rates Affect China'S Textile Exports?

According to the world clothing shoe and hat net reporter.

Recently, the Fed announced that it raised the target rate of the federal funds rate by 25 basis points, meaning from 0.25%~0.5% to 0.50%~0.75%.

This is the first time the Fed has raised interest rates for the first time in a year. It is also the second increase in interest rates in the past 10 years (the current round of interest rate hikes).

Chairman Yellen said the interest rate increase was only a very small adjustment on the Federal Reserve's interest rate path.

The implication is that the Fed may raise interest rates again or again in 2017.

The impact of the Fed's interest rate increase on international capital flows, foreign trade and stock market debt can not be underestimated. Then what will be the impact of China's textile industry?

The US dollar surged to its highest level in 14 years after rising from the expected increase in interest rates in 2017, while emerging market currencies plunged sharply to a new low.

The Fed's raise interest rate once devalued the RMB to the low level in the past 10 years. Theoretically speaking, this is a good price competition for export enterprises, which is conducive to increasing our export to the United States, especially textile and garment industries, but the cost of import of raw materials and production tools will increase.

Under the current situation, the impact of the Fed's interest rate hike on China's textile industry needs to be comprehensively analyzed.

First of all, the cost of importing high grade and high grade cotton such as American cotton and Australian cotton increased.

The US and US dollar index rose sharply under the impetus of the Fed's interest rate increase, including the pressure of devaluation of emerging countries such as the renminbi, and the rising cost of imports, which is not conducive to imports of bulk commodities such as cotton.

Considering that Trump's election has changed the political environment of monetary policy, the increase in the deficit has led to a sharp increase in the interest rate of the Federal Reserve. Therefore, textile factories and import enterprises that have 1% cotton import quotas within the tariff range are likely to increase the signing of foreign cotton imports in recent months, so as to lock in the cost of imported raw materials as soon as possible.

Of course, compared with the US cotton, Australia cotton, etc., the purchase of India cotton, Uzbekistan cotton and so on, the impact of the rise in the US dollar index is not big (currencies are depreciating against the US dollar).

Second, imports from India, Pakistan and Vietnam.

And the influence of grey cloth is not obvious.

From the survey point of view, since 2015, China's looms and traders have purchased cotton yarn from Southeast Asia directly to the cotton mill, basically bypassing foreign trade companies or exporters, and mainly signed "futures" yarn (about 70% of Vietnamese yarn imported is sold back to China in Vietnam). The buyers and sellers directly "negotiate" to a certain extent evaded the risk of US dollar exchange rate fluctuations. However, because the devaluation of the currencies of the two currencies is inconsistent or the direction of adjustment may not be consistent, in 2017, for Chinese purchasing enterprises, it is possible to shorten the order period, advance shipment, or negotiate with foreign mills to lock the exchange rate, which is more conducive to the import of yarn and grey cloth.

Again, the Fed's interest rate increase does not mean that China's textile and clothing exports "outbreak" opportunities.

The trend of depreciation is inevitable (some experts suggest that the depreciation of the Renminbi before the inauguration of Trump before January 20th) is conducive to China's export earning, and textile and clothing exports rebounded rapidly. But what we need to pay attention to is that the countries such as Europe, Japan and other countries have "torn" the WTO agreement in recent years, refusing to recognize the status of "market economy country", and still use the "substitute country" price in anti-dumping. Therefore, the developed countries in Europe and the United States in 2017 set up barriers to import trade, frequent anti-dumping measures against Chinese products, and weakened the export competitiveness and channels of Chinese products. Although the US index continues to climb, the RMB continues.

In the long run, the Fed's interest rate increase will bring many uncertainties to China's textile industry.

Li Haifeng, economist at Bank of China, believes that the Federal Reserve's interest rate hike will accelerate capital outflow.

Since the beginning of 2016, countries around the world have tried every means to attract funds to boost their economies. By the end of the year, the increase in interest rates in the United States will lead to the reversal of capital flows.

It can be predicted that in 2017, a large amount of capital will flow out of some emerging economies and resource exporting countries, which will devalue their domestic currencies and increase their debt burden, which will lead to regional financial turmoil and even crisis.

For the Chinese textile enterprises, which are at the forefront of the market economy, the chance to get the financial support from the banks is relatively small. If the overall capital is tight, the financing difficulty of the textile enterprises will be more obvious.

According to the analysis, with the recovery of the US economic recovery, the "US made" strategy and the cost advantages brought by high and new technologies, especially after the US interest rate hike, the US bond yields will rise, and the long-term capital flows to the US will further increase in the future, and will also greatly divert the global FDI.

Under such circumstances, our country

The pressure of rising labor costs and increasing resource and environmental constraints will not only improve the light industry enterprises, but also accelerate capital outflow under the combination of dual functions, thus failing to form a reasonable cycle. This will affect the direct investment in China's textile, light industry and building materials industry for a long time.

In addition, the appreciation of the US dollar will lead to a decline in the credit rating of some emerging markets, a deterioration of the financial environment and a decline in exports.

However, in order to maintain market share, more and more emerging market countries, together with the ASEAN countries and even the developed economies such as Japan and the EU, have joined the camp of currency devaluation. They will not only cause currency competition to depreciate, exacerbate global trade and monetary frictions, but also make the renminbi "excessive appreciation" against the non US dollar exchange rate such as the euro, yen, won and Australian dollar. The internationalization process of RMB will be greatly delayed. Then the RMB settlement adopted by textile and light industrial enterprises to Europe, Japan or other countries will return to the old way of settlement with us dollar.

Sun Lijian, director of the financial research center of Fudan University, believes that from the perspective of trade and overseas investment, trade protectionism will rise in the future. It is manifested in the dominant barriers of high tariffs and the invisible barriers that restrict imports because of factors such as violation of intellectual property rights and environmental standards.

The impact on Chinese investment enterprises in the US will be good capital intensive enterprises, and technology intensive enterprises.

In addition, the United States will ask the Chinese government to open up the local service industry and increase the purchase of American goods.

Sun Lijian, director of the financial research center of Fudan University, believes that in the medium to long term, the promotion of US trade protectionism and the recovery of the domestic economy of the United States, especially the easing of employment problems, will play an important role in the external environment of China's economic development.

From the domestic point of view, it depends on whether our supply side structural reform is in place, to ensure that the core competitiveness of Chinese enterprises in an open environment can be improved, the financial services and financial risk supervision of Chinese financial institutions are in place in time, and the governance mechanism of the government and the market's benign interaction has changed qualitatively.

The better the latter, the easier it will be to slow down the exit of quantitative easing and the challenge of external protectionist policies.

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