What Will Be The Impact Of RMB Depreciation On Vietnamese Textiles?

Sino US trade war intensified, China lowered the RMB exchange rate, making the RMB against the dollar exchange rate hit a new low of ten years, 1 yuan to 7 yuan. What impact will it have on Vietnamese textiles?

Fei Yuezheng, general manager of Hoan Kiem Lake clothing group, said that the export of Hoan Kiem Lake clothing group is the main reason. Therefore, China's reduction of the RMB exchange rate will not have a big impact on the export products of the company, because most of its products are exported to Europe, Japan, Korea and other markets, and the settlement currency is US dollars.

Shen Deyue, general manager of clothing company No. 10, revealed that the company imports less from China, and the settlement currency is mainly US dollars, so it has little impact on enterprises. The depreciation of the renminbi and the rise in the US dollar are beneficial to the export enterprises.

However, the chairman of the Vietnam Textile Association, Wu De Jiang, said that when the Sino US trade war took place (from May 2018 to September), the yarn export volume of Vietnam decreased by 2.5% a month. Vietnam's export price to Chinese yarn dropped from 3.05 US dollars to 2.99 US dollars per kilogram, a decrease of about 1.97%. Of course, the sudden devaluation of the RMB made its exchange rate against the US dollar ten years low, which has a huge impact on the Vietnamese yarn industry.

Vietnam construction securities remind investors that although Vietnam is a hot spot for investment in Southeast Asia, it still needs to pay attention to controlling investment risks. Vietnamese exports to China will import cotton from the United States. In the future, if the RMB continues to depreciate, Vietnam's yarn exports to the market will continue to face difficulties.

Wu Dejiang disclosed that Vietnam's yarn exports were mainly in the Chinese market, with an average annual export volume of over 60% of Vietnam's yarn exports. For China, Vietnam is the main partner of yarn supply, and its market share is increasing year by year.

In 2014, Vietnam was the third largest supplier of Chinese yarns (next to India and Pakistan). In 2017 and 2018, Vietnam has become China's largest yarn supplier, accounting for 30% of China's yarn imports and even more than India and Pakistan's total exports.

The representative of Danshan yarn company revealed that the annual export volume of the yarn to China could reach 1400 tons, but now the export volume has dropped sharply, and even the new orders have not been made in September. The reason is that prices have fallen sharply, not enough for production costs. Coupled with the depreciation of the renminbi, Vietnam's yarn exports will face greater difficulties.

Some yarn enterprises say that Chinese partners are pressing prices on Vietnamese yarn enterprises to reduce the difference between the US dollar and the renminbi. According to the Vietnam yarn Association, Vietnam's yarn exports will drop by 10-15% compared to the same period last year, and the selling price will be reduced from 3.5 US dollars per kilogram to 2.8 US dollars, and the economic loss of the enterprises will be more than 500 million US dollars.