RMB's Recovery Will Benefit Cotton Imports

At the beginning of December 2018, when the leaders of China and the United States reached consultations to resolve trade disputes at the G20 summit, the renminbi rose again, and the middle price against the US dollar rose from 6.9357 at the end of 11 to 6.7542 in January 15th, the highest point since July 19th last year, with a 2.6% appreciation. Since the outbreak of trade friction between China and the United States last April, the RMB maintained its depreciation trend, to a minimum of 6.9629 in November 13th, a cumulative depreciation of 10.9% compared with 6.2764 in early April, providing help for downstream textile enterprises to ease export pressure. The current appreciation of the renminbi is slightly unfavorable to textile and clothing exports, but it is very advantageous to reduce the import price of cotton. Last year, at the end of December last year, the relevant departments adjusted the formula of cotton import slip tax, and the overall import of cotton imports was good.


For example, according to the net import price index of cotton imported in December 3rd last year, 87.71 cents / pound in January 15th dropped to 82.21 cents / pound, and the price fell by 6.3%. According to the exchange rate in December 3rd, the middle price of the exchange rate was 6.9431. If the exchange rate remained unchanged until recently, the import cotton price index was 1%. The tariff rate of RMB decreased from 15116 yuan / ton to the current 14181 yuan / ton at the beginning of December, and the price dropped 6.2%. If the central parity of RMB against the US dollar rose to 6.7615 in January 16th, the price of the 1% tariff will be reduced to 13815 yuan / ton, and the price of the RMB will be reduced to 14893 yuan / ton under the sliding tax. The price will be reduced by 8.6% and 6.7% respectively compared with that in December 3rd. The import price has dropped by 366 yuan / ton and 229 yuan / ton respectively than the exchange rate has not been adjusted. It can be seen that the appreciation of the RMB exchange rate is more effective in reducing the cost of imports.


According to market forecasts, the trend of RMB will stabilize and recover in 2019, which is mainly influenced by the US dollar index and the progress of Sino US trade negotiations. On the one hand, as the downward pressure on the US economy increases, the Fed will be more cautious about raising interest rates, the US dollar index may also maintain a downward trend, the RMB will "passive appreciation"; on the other hand, the Sino US trade war may ease, the market expectation is better, and the depreciation of the RMB is expected to decline.