The onshore CNY closed at 6.7655 against the USD on July 29, 2026, with the central parity rising to 6.7899—the highest since February 10, 2023. For textile exporters, this means profit margins are being squeezed by the appreciating yuan. The PBOC injected a net 730.5 billion yuan through reverse repos that day, signaling a liquidity-easing stance.
The Transmission Chain of Exchange Rate Appreciation
The appreciation is driven by two factors: the PBOC's loose policy—7-day reverse repo rate at 1.40% and a 600 billion yuan overnight operation—and a weakening USD. For textile exporters, the most sensitive link is settlement. About 60% of China's textile and apparel exports are USD-denominated, with payment cycles of 30-90 days. A rise from 6.78 to 6.76 means a loss of about 2,000 yuan per $1 million order. If the trend continues, annual profit compression could reach 3%-5%.
The Dilemma for SMEs
Large textile groups use hedging tools like forward contracts, but many SMEs lack such capabilities. Their core problem: order prices were locked months ago, but settlement rates keep strengthening. In clusters like Keqiao and Shengze, companies are shifting to smaller, shorter orders to reduce exposure. In Nantong's home textile belt, where export margins are 10%-15%, a 2% appreciation erodes nearly one-fifth of profits. Some firms try CNY-denominated quotes, but overseas buyers are reluctant.
Signals from PBOC Operations
The PBOC's net injection of 730.5 billion yuan on the same day suggests a policy focus on growth over exchange rate stability. For textile firms, this means no immediate policy intervention to reverse the yuan's strength—they must adjust settlement strategies themselves.