The Explosion Of Clothing Industry Is Here!

Opportunity!

Plunging, the garment industry broke out in January 26th, and the RMB exchange rate against the US dollar began to drop sharply. After falling below 6.250, it was close to nearly 2%. This is also the lower limit of official allowed single day float, the largest record in history.

It is also a new low in the past eight months.

On the other hand, the euro also fell below 7 against the renminbi, the first time since June 2001, and its biggest decline in the two trading days was nearly four years.

Following the announcement of Delagi, President of the European Central Bank, since March, 60 billion euros have been purchased each month, and the currency ripple effect has been generated until September 2016 or the euro area inflation rate has risen to 2%.

The new QE policy of the European Central Bank and the trend of the normalization of QE in the US will further push the US dollar exchange rate to strengthen, which may bring downward pressure on the RMB to the US dollar exchange rate.

Global US forces are shrinking and US overseas industry investors are returning to the US. Not only that, but the United States is also taking advantage of the global political and economic turmoil to absorb global industrial capital flows to the United States, so as to restore the leading position of the US in the global manufacturing industry and reverse the unfavorable pattern of the US long-term deficit in international trade.

The US dollar is the most powerful currency in the world today, and the appreciation cycle is about to start in full swing. Coupled with the US interest rate hike, it will continue to depress the RMB in the future.

But that may not be bad news for China's economy.

As we all know, the current RMB effective exchange rate has been overvalued, which is the fundamental reason for the slow recovery of China's economy.

If the overvaluation of the renminbi is corrected, that is, the depreciation of the exchange rate will bring the Chinese economy back to the growth rate of more than 7.5%.

It is optimistic that the maximum depreciation rate of RMB exchange rate will reach 5% in 2015.

In the medium to long term, the depreciation period of RMB is a big red envelope for export oriented enterprises.

The most typical one is the clothing industry: the leading position of China's clothing industry in the international market is beyond doubt.

Because of the high dependence on exports, the depreciation of RMB will help companies reduce costs and enhance competitiveness of products. Enterprises will get more orders, and on the other hand, it will help export enterprises gain foreign exchange earnings.

The depreciation of the renminbi means that the purchasing power of foreign currencies will be enhanced, which will further stimulate consumption and benefit the export of garment industry.

Specifically, the value of the RMB depreciated by 1%.

Clothing sales profit margin increased by 2%-6%.

Statistics show that the dependence on export of cotton textile, wool textile and clothing for RMB exchange rate is 20%, 27% and 60% respectively.

At present, the average net profit margin of the entire textile and garment industry is only 5%~6%.

With the recent exchange rate changes, the net profit margin of the industry will reach the 15% - 20% interval level.

Taking seven wolves as an example, the net profit in the three quarter of 2014 has increased by 95%, revealing the clue.

The turning point of the entire garment industry is not only reflected in exports, but also from the raw material side.

Due to the continued downturn in demand for garment industry in the lower reaches of the previous period, textile enterprises are still cautious about replenishment of stocks, and cotton prices continue to fall as new cotton comes into the market.

2014 in December, the domestic cotton price declines increased from last month, and the overall cotton price drop reached 620 yuan / ton, leading to a sharp drop in the cost of garment industry in the four quarter.

In addition, the new export tax rebate policy has been implemented since January 1, 2015. In addition to cotton and some silk and cocoon products, most of the textile export tax rebate rate increased from 16% to 17%.

Anhui province and other 9 provinces and municipalities for the textile industry "high levy low deduction" unreasonable tax loosening, help ease the textile and garment industry operation pressure.

Boom is picking up again.