The RMB central parity against the USD hit 6.7989 on July 10, 2026, strengthening by 47 basis points to its highest level since February 2023. For textile exporters whose revenues are mostly dollar-denominated, this is not just a routine fluctuation—it signals a dual squeeze on costs and profits.
Transmission Mechanism of RMB Appreciation
In the profit formula of textile foreign trade firms, forex gains or losses now carry greater weight. Take a $1 million export order: compared to the central parity level in February 2023, the RMB amount received today is about 470,000 yuan less—roughly the net profit of an entire regular fabric order.
More concerning is the pace: a single-day move of 47 basis points means small and medium enterprises without forward hedging can lose a month's profit in one day. Industry data shows the current exchange rate is the strongest since February 2023, while average export profit margins in textiles have long hovered between 3% and 5%.
Tightening Monetary Policy Adds Pressure
Alongside the appreciation, the central bank conducted open market operations that resulted in a net withdrawal of 43 billion yuan on July 10, as 20 billion yuan in 7-day reverse repos were issued but 63 billion yuan matured. For the full week, net withdrawals via reverse repos and outright reverse repos totaled 416.5 billion yuan—a relatively high level that signals active tightening of interbank liquidity.
For textile firms, tighter liquidity means higher financing costs, especially for small and medium weaving and dyeing mills that rely on short-term loans for raw material procurement. While the appreciation lowers the cost of imported raw materials like cotton and chemical fibers, the rise in domestic financing costs offsets part of that benefit. The net effect is clearly negative for export-oriented companies.
Industry Response and Market Outlook
In major textile clusters like Shengze and Keqiao, exporters have started adjusting their quotation strategies. Some are trying to pass on the appreciation cost in FOB quotes, but overseas buyers are resistant, prolonging order negotiations.
On the flip side, the stronger RMB benefits importers of raw materials. For example, less RMB is needed to buy the same amount of US or Australian cotton. This offers a cost-hedging opportunity for knitting and home textile companies that use imported cotton. However, the actual benefit depends on each firm's raw material sourcing mix, given the still-existing price gap between domestic and imported cotton.
From a policy perspective, the 1.40% reverse repo rate has remained unchanged for weeks, indicating the central bank is balancing exchange rate and interest rate goals—neither wanting rapid appreciation to hurt exports nor easing liquidity to fuel inflation. This 'stable but slightly tight' stance is expected to persist for at least the next quarter.