The RMB exchange rate is fluctuating around 6.80 against the USD, putting textile foreign trade enterprises under renewed pressure on pricing and profit management. On July 7, 2026, onshore RMB closed at 6.7956, down 31 pips from the previous day, while the central bank's open market operations resulted in a net withdrawal of 595 billion yuan, reinforcing market expectations of liquidity tightening.
What does this combination signal? For the textile industry, with annual exports exceeding $300 billion, every 1% change in the exchange rate directly affects about $3 billion in profit margins across the sector. The current depreciation trend offers short-term advantages for exporters to win orders with lower dollar quotes, but persistent depreciation also brings risks in forward settlement and rising costs for imported raw materials.
Exchange Rate Trends and Policy Signals
Data from the China Foreign Exchange Trade System shows that on July 7, the central parity rate of RMB against the USD was 6.8054, up 12 pips (i.e., RMB appreciation) from the previous trading day. However, the onshore spot rate closed weaker, reflecting ongoing market expectations of a short-term RMB depreciation.
Meanwhile, the central bank conducted 10 billion yuan in 7-day reverse repo operations, with the operation rate unchanged at 1.40%. Due to 69.5 billion yuan in reverse repos maturing that day, the net withdrawal was 59.5 billion yuan. This is part of a recent trend of net withdrawals in open market operations, indicating that while monetary policy maintains reasonable liquidity, it has not further eased.
Historically, persistent divergence between the central parity rate and the spot closing rate often signals a tug-of-war between market sentiment and policy intentions. For textile foreign trade enterprises, this divergence increases the difficulty of hedging exchange rate risks—the central parity represents official guidance, while the spot rate is the actual transaction price.
Industrial Transmission: Export Benefits and Import Pressures Coexist
The impact of RMB depreciation on the textile industry is not unidirectional. On the export side, dollar-denominated orders yield more RMB income upon settlement, helping to improve profit margins. Especially against the backdrop of slowing global textile demand growth, exchange rate advantages have become a key bargaining chip for some enterprises to maintain export market share.
But the other side of the coin is rising import costs. China's textile industry imports large quantities of cotton, chemical fiber raw materials, and high-end dyes and auxiliaries annually, mostly settled in dollars. RMB depreciation directly pushes up raw material procurement costs, squeezing profits in spinning and weaving stages. For processing trade enterprises with both ends abroad, exchange rate fluctuations can even erode the entire processing fee.
Regionally, export-oriented industrial clusters such as Shaoxing Keqiao and Wujiang Shengze are most sensitive to exchange rate changes. Small and medium-sized enterprises in these areas generally lack professional exchange rate risk management teams and often adopt a "follow the market" pricing strategy, making them vulnerable during sharp exchange rate fluctuations.
Practical Recommendations
For Buyers - During the RMB depreciation cycle, prioritize signing medium- to long-term dollar-denominated contracts with exporters to lock in current lower RMB procurement costs. - Monitor the pace of central bank reverse repo operations; if net withdrawals continue, RMB may weaken further, allowing early placement of orders for autumn/winter fabrics. - Require suppliers to include exchange rate adjustment clauses in quotes, agreeing to renegotiate if fluctuations exceed 2%, avoiding unilateral assumption of exchange losses.
For Foreign Trade Enterprises - Establish a foreign exchange risk reserve system, setting aside 3%-5% of expected profits as a hedging fund, using forward settlement or option instruments to lock in order profits. - Optimize the settlement currency structure, promoting RMB settlement in emerging markets such as Southeast Asia and the Middle East to reduce reliance on a single dollar currency. - Use the RMB depreciation window to accelerate overseas inventory clearance, offering more competitive dollar quotes to capture market share while avoiding long-term credit sales.
The tug-of-war in the RMB exchange rate range of 6.80-7.00 is far from over. Textile foreign trade enterprises need to shift from passive response to active management, incorporating exchange rate volatility into corporate strategy rather than treating it as an occasional risk. When the industry's average profit margin has already fallen below 5%, exchange rate management capability may become the next watershed.