In recent years, with the Federal Reserve's interest rate hike, interest rate cut, and the recent imposition of tariffs by Trump, the RMB exchange rate has fluctuated greatly. For many textile people who do foreign trade, the exchange rate factor has even become one of the main sources of profit for enterprises in today's increasingly volled-up market, and in some particularly volatile years.
The exchange rate of the renminbi has fluctuated
The recent exchange rate of RMB has been ups and downs.
After the Spring Festival, the exchange rate of RMB against the US dollar showed a sharp appreciation. As of 19:00 on February 24, the exchange rate of USD against RMB in the domestic onshore market (CNY) and the exchange rate of USD against RMB in the offshore market (CNH) hovered around 7.2502 and 7.2498, respectively, and hit intra-day highs of 7.2278 and 7.2252 respectively. It is up almost 800 BP from the high of 7.33.
In recent days, the RMB exchange rate has depreciated again, and around 14:49 on March 3, the offshore RMB fell below the 7.3 mark against the US dollar.
As of 16:40 PM, the offshore yuan was quoted at 7.3042 to the dollar, while the onshore yuan was quoted at 7.2933 to the dollar, approaching the important 7.30 mark.
The same $1 million worth of a textile foreign trade order, only a short time difference of one week, can be converted into RMB difference of almost 70,000 yuan, the range is close to 1%, really let the textile people a little off-guard.
Why does the renminbi fluctuate?
First, the logic of a stronger RMB exchange rate
Around the Spring Festival, the weakening of the US dollar and the decline of the US dollar index mean that the exchange rate of the US dollar is weaker against a basket of major currencies, and the RMB, as one of the non-US currencies, will naturally be affected by this trend and appreciate. In addition, during the Spring Festival, emerging industries and emerging technologies represented by robots and new energy vehicles quickly emerged from the circle, detonating the capital market after the year, and the securities market represented by Hong Kong stock technology attracted a large amount of foreign investment. The People's Bank of China has maintained a relatively neutral monetary policy, avoiding the pressure of currency depreciation caused by excessive easing.
2. Reasons for the depreciation of the RMB exchange rate
Recently, the Trump administration once again announced an additional 10% tariff on Chinese goods. Mr. Trump, who has threatened to impose 60 percent tariffs on Chinese goods, appears to be taking a phased approach. In addition, the United States has encouraged Mexico and Canada to raise tariffs on Chinese goods. Finance Secretary Bessant claimed on Friday (February 28) that Mexico has proposed to impose tariffs on China equivalent to those imposed by the United States on China, and the depreciation of the exchange rate can hedge the impact of the tariffs to some extent.
The medium - and long-term trend of the RMB exchange rate to remain basically stable remains unchanged
At the beginning of this year, the RMB onshore and offshore exchange rate volatility intensified. From the perspective of a single exchange rate, market participants believe that the recent volatility of the RMB exchange rate is mainly due to the strengthening of the US dollar index, which has continued to be affected by the weakening of the Federal Reserve's monetary easing expectations and the return of the so-called "Trump trade" since October 2024, and non-US currencies are generally under pressure at the beginning of 2025. Experts generally point out that observing the RMB exchange rate fundamentally still depends on domestic economic fundamentals. From the perspective of market analysis, the current fluctuation of the RMB exchange rate does not change the long-term trend of the RMB exchange rate to remain basically stable. "We think the yuan is expected to remain basically stable, with bilateral volatility. Our current view on the RMB exchange rate is that even if there is some phased or temporary depreciation, the maximum point direction may be about 7.5 or 7.6, and it will not fall too much." Huachuang Securities Research Institute deputy director, chief macro analyst Zhang Yu said.
The long-term impact of the tariff stick will be limited
In the short term, it is one of the most influential factors on the exchange rate and market conditions, but the long-term impact is relatively limited.
In Trump's last term, the instantaneous impact of the tariff policy on China's textile industry is indeed not small, and in 2019, textile and apparel exports to the United States fell by $3.4 billion, a drop of up to 8%, but with the development of time, China's exports have recovered well.
In 2018, China's surplus with the United States was $3,233, which became $2,960 in 2019 due to the impact of tariffs, but it returned to $3,169 in 2020, and it is as high as $3,966 in 2021, which shows that the effect of tariffs on the so-called reduction of the US trade deficit is limited. In terms of exports, China's exports to the United States in 2018 were 478.4 billion US dollars, which fell to 418.7 billion US dollars in 2019 and rose to 524.7 billion US dollars in 2024. At the same time, China's share of U.S. imports fell from 21.6 percent in 2017 to 12.8 percent in 2024.
Therefore, the impact of this round of US tariffs may not be as big as expected.
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