On September 2, the central parity rate of the Chinese yuan against the US dollar was set at 6.7829, up 20 basis points from the previous trading day. This seemingly minor adjustment has sent ripples through the textile foreign trade community—for export orders with already thin margins, every movement in the exchange rate directly affects the realization of contract profits. More notably, the central bank's open market operations resulted in a net withdrawal of 598.5 billion yuan on the same day, and the combination of tightening liquidity and exchange rate fluctuations puts pressure on both financing costs and exchange risk for exporters.
The Liquidity Logic Behind the Rate Adjustment
The 20-pip upward adjustment means a slight depreciation of the RMB against the USD. In theory, this is favorable for textile exporters as it enhances price competitiveness, but the actual impact is far from linear. The central bank announced zero 7-day reverse repo operations on the same day, and with 239.5 billion yuan of 7-day reverse repos and 359 billion yuan of overnight reverse repos maturing, the net withdrawal reached 598.5 billion yuan. This is one of the largest single-day liquidity withdrawals recently, reflecting a precise adjustment of market liquidity while maintaining a neutral monetary policy stance.
Tightening liquidity typically pushes up short-term funding rates, thereby affecting corporate financing costs. For textile mills that rely on bank loans or bill discounting to finance order turnover, this could mean higher financial expenses. When the incremental benefits from exchange rate depreciation are insufficient to cover rising financing costs, the actual profit margins of exporters may not improve but rather decline. Therefore, the central parity adjustment is not just a numerical change in the exchange rate, but an important reference for corporate financial decisions.
Transmission to Textile Exports: Orders, Prices, and Profits
The positive effect of exchange rate depreciation on textile exports is mainly reflected in the fact that orders denominated in foreign currencies can be exchanged for more domestic currency upon settlement. However, in the current global textile supply chain, order prices are often locked in advance, and exchange rate fluctuations mainly affect the exchange gains and losses of existing orders. If enterprises do not hedge, depreciation may bring one-time gains; conversely, appreciation directly erodes profits. Since 2026, the RMB exchange rate has experienced intensified two-way fluctuations, and if enterprises continue to use the 'follow the market' settlement model, their risk exposure will significantly expand.
From the response of industrial clusters, foreign trade enterprises in Keqiao, Shengze, and other places have begun to adjust their quotation strategies. Some enterprises have shortened the validity period of quotations to one week to avoid exchange rate fluctuation risks; others are trying to include exchange rate adjustment clauses in contracts, stipulating that if the exchange rate changes beyond a certain range, both parties will renegotiate prices. These practices reflect the industry's increased sensitivity to exchange rates, and also mean that the traditional 'one-price' model is being replaced by more flexible pricing mechanisms.
Practical Recommendations
For Buyers - Clearly define the exchange rate fluctuation sharing mechanism in import contracts, such as setting price adjustment thresholds, to avoid one party bearing all exchange risks. - Prioritize settlement in RMB or a basket of currencies to diversify the impact of a single currency fluctuation. - Monitor central bank open market operations and central parity trends, and arrange payment schedules reasonably to avoid concentrated payments during periods of sharp exchange rate volatility.
For Foreign Trade Enterprises - Establish an exchange rate risk management system, set a tolerable exchange rate fluctuation range, and proactively lock in costs through forward foreign exchange settlement or options when the range is exceeded. - Optimize the settlement currency structure by appropriately increasing the proportion of non-USD currencies such as the euro and yen, reducing over-reliance on the US dollar. - Incorporate exchange rate factors into product pricing models and dynamically adjust quotations based on exchange rate trends, rather than passively accepting market rates.
The exchange rate is an 'invisible variable' in textile foreign trade, and its impact often lags behind the order delivery cycle. At a time when liquidity tightening and exchange rate fluctuations coexist, enterprises can only protect their profit bottom line in an uncertain market by integrating exchange rate management into daily operations. The Textile Circle will continue to monitor central bank policy trends and exchange rate changes, providing timely and professional interpretations for the industry.