On July 17, 2026, the onshore RMB closed at 6.7773 against the U.S. dollar, down 95 points from the previous trading day. On the same day, the People's Bank of China conducted a net injection of 430.5 billion yuan through 7-day reverse repo operations, keeping the operation rate unchanged at 1.40%. For the textile industry, this dual signal means shrinking settlement income and rising raw material costs.
Currency Depreciation: Silent Erosion of Export Profits
RMB depreciation theoretically benefits exports, but the real impact is not one-way. According to China Customs data, textile and apparel exports are mostly settled in U.S. dollars. For every 1% depreciation of the RMB against the dollar, exporters' RMB-denominated revenue increases by about 1%. However, the 95-point drop on July 17 represents a depreciation of about 0.14%. If this trend continues, the monthly depreciation could reach 0.5% to 1%. For textile exporters with profit margins typically between 3% and 5%, exchange rate fluctuations can wipe out a quarter's profit growth.
More critically, depreciation expectations often lead overseas buyers to demand price concessions. Buyers frequently cite 'favorable exchange rates' as a reason for discounts, potentially offsetting the actual transaction price. Fabric companies in Shengze and Keqiao report that the proportion of customer inquiries with exchange rate adjustment clauses has increased by about 20% since the second quarter. This means that the book gains from exchange rates are partially offset by commercial negotiations.
Monetary Policy Easing: Potential Push for Raw Material Costs
On the same day, the central bank net injected 430.5 billion yuan. While the operation rate remained unchanged, the scale of net injection hit a recent high. This signals two things: first, the central bank maintains loose liquidity to support the economy; second, capital costs remain low. For upstream sectors like chemical fibers and cotton, loose liquidity often accompanies rising commodity prices.
In the chemical fiber sector, products like PTA and polyester staple fiber are highly correlated with crude oil and capital markets. In the first half of 2026, polyester filament yarn prices were under pressure due to overcapacity, but loose liquidity may stimulate speculative restocking, pushing up short-term prices. The cotton market is similarly sensitive: Zhengzhou cotton futures are significantly influenced by macro capital, and net injections may trigger a spike in cotton prices. Enterprises in the Nantong home textile cluster need to be cautious: if raw material costs suddenly jump during order delivery, processing profits will be directly eroded.
Supply Chain Transmission: Scissors Gap from Exchange Rates to Costs
The combination of RMB depreciation and loose liquidity creates a typical 'scissors gap' in the textile supply chain: on the export side, RMB-denominated revenue increases but is offset by buyer price pressure; on the import side, foreign cotton and chemical fiber raw materials are priced in U.S. dollars, and RMB depreciation actually pushes up import costs. For spinning mills using imported cotton, such as those in Shandong and Henan, the cost per ton of imported cotton may increase by about 150 to 200 yuan.
At the same time, the domestic market has not benefited synchronously. Domestic apparel consumption growth is slowing, and brands are highly sensitive to the purchase prices of gray fabrics and fabrics. Rising upstream costs are difficult to smoothly pass downstream, and intermediate sectors like weaving and dyeing will bear the greatest profit squeeze. In the second quarter of 2026, the operating rate of some weaving mills in Jiangsu and Zhejiang dropped from 85% to 78%. The dual pressure of exchange rates and costs may accelerate industry consolidation.
Practical Recommendations
For Buyers - Include exchange rate fluctuation buffer clauses in contracts with suppliers, agreeing to share cost changes proportionally if the monthly RMB fluctuation exceeds 0.3%. - Shorten procurement cycles from traditional 90-day letters of credit to 60 days to reduce exchange rate exposure time. - Monitor the pace of central bank reverse repo operations; in the one to two weeks following a large net injection, be cautious about chasing raw material inventory.
For Exporters - Immediately confirm forward foreign exchange settlement rates with banks to lock in settlement prices for the next three months of export orders; the current level around 6.78 is a good window for hedging. - For imported raw materials priced in U.S. dollars (e.g., U.S. cotton, Australian cotton), consider using currency options to hedge against appreciation risks, rather than relying solely on natural hedging. - Clearly state in quotations that 'the exchange rate is valid for 15 days' to avoid losses from rapid exchange rate fluctuations.
Every movement of the RMB exchange rate rewrites the profit statements of textile exporters. In the second half of 2026, companies need to integrate exchange rates and monetary policy into daily operational decisions, rather than treating them as mere macro background.