The onshore renminbi closed at 6.7784 against the US dollar on July 10, 2026, surging 151 basis points in a single day, with the midpoint rate hitting its highest level since February 10, 2023. For textile exporters, this means every dollar of exports now yields approximately 0.15 yuan less when converted into renminbi. For a medium-sized fabric factory with annual exports of $50 million, the exchange rate shift alone could erode profits by over 7 million yuan per year.
Exchange Rate Trends and PBOC Operations
On July 10, the People's Bank of China set the USD/CNY midpoint at 6.7989, down 47 pips from the previous day. The central bank conducted 20 billion yuan in 7-day reverse repos at an unchanged rate of 1.40%. With 63 billion yuan in reverse repos maturing the same day, net liquidity withdrawal stood at 43 billion yuan. For the week, the PBOC injected 62 billion yuan via 7-day reverse repos and 1 trillion yuan via outright reverse repos, but faced 678.5 billion yuan in reverse repo maturities and 800 billion yuan in outright reverse repo maturities, resulting in a net withdrawal of 416.5 billion yuan.
This operational signal deserves attention from textile enterprises. While keeping rates steady, the PBOC withdrew some liquidity through open market operations, indicating a higher tolerance for renminbi appreciation. The yuan's strength is driven by a combination of export settlement demand and capital inflows. For the textile industry, the exchange rate has moved from the 6.90 range toward 6.77, appreciating more than 1.5% in three months—a pace that cannot be ignored.
Impact on Textile Exporters
The most direct effect of renminbi appreciation is reduced competitiveness of export products priced in US dollars. In fabric clusters like Keqiao and Shengze, foreign trade companies typically quote in dollars but settle in renminbi. For every 1% appreciation, gross margins fall by approximately 0.8-1.2 percentage points. Given that current gross margins for cotton and chemical fiber fabrics hover between 8-12%, exchange rate fluctuations can easily wipe out already thin profits.
However, order structures are diverging. High-value-added products such as functional fabrics and differentiated fibers are less price-sensitive, allowing companies to pass on some exchange rate costs through modest price increases. In contrast, commodity items like plain taffeta and polyester pongee face sharper competition from Southeast Asian rivals, forcing Chinese firms to absorb the exchange rate losses. Surveys from the Nantong home textile cluster show that orders from the Middle East and Africa have declined about 5% year-on-year, while orders from Europe and America for high-count, high-density bedding products continue to grow.
Industry Response Strategies
More textile exporters are incorporating exchange rate risk management into daily operations. The adoption rate of forward contracts and currency options among small and medium enterprises in Shengze and Shaoxing has risen to about 30%, double the level of two years ago. Some companies are also denominating purchases of imported chemical fiber raw materials in foreign currencies to create natural hedges.
From a supply chain perspective, renminbi appreciation benefits links with high import dependency. Domestic chemical fiber producers see lower costs for imported PX and MEG, which could theoretically pass through to downstream fabric mills. In reality, prices of PTA and polyester filament yarn are more influenced by crude oil and supply-demand dynamics, with upstream players often capturing the exchange rate dividend. Fabric mills seeking real benefits need to lock in renminbi-denominated raw material prices in procurement contracts.