What Happened to the Recent Exchange Rate?

Since July, China’s RMB has been rising in the international exchange rate, from the 7:1 exchange rate for USD in early 2020 until yesterday’s exchange rate was 6.81:1.

Why is the RMB constantly appreciating?

The global epidemic has spread. Up to now, only China's economy has been fully developed and has grown rapidly around the world. Therefore, investors and various financial institutions around the world are optimistic about China's economy, which has caused China's RMB to continue to appreciate. At the same time, the Federal Reserve continues to manipulate and accelerate the continuous growth of the RMB. This has caused the RMB to increase by more than 3,800 points in just three months.

For example, a Chinese foreign trade factory received an order from the United States three months ago, with a total payment of 1 million U.S. dollars and a production cycle of 3-4 months. Now the order profit of the Chinese factory is equivalent to a reduction of 200,000 yuan. Purchasers in the United States for the same order have reduced the purchase cost by approximately $30,000.

So will this situation continue as it is now?

It depends on the development direction of China's economy and national policies. The long-term high appreciation of the RMB is not good for China's exports. The United States is not a production-exporting country, and it relies more on imported products for sales. Once the U.S. dollar has been depreciated in the international market for a long time, it will accelerate the reduction of investor confidence. The consequence of this is that the U.S. economy will retreat on a large scale, which will lead to more business failures and increase the unemployment rate.

Due to the large fluctuations in the exchange rate, for the orders that are being executed, companies can only find ways to reduce production costs and minimize the resulting losses.

In the absence of a transaction or an order that has already been quoted, the company should communicate with the customer as soon as possible to adjust the quotation, and do not make price adjustments for the sake of reputation because of changes in the exchange rate.

This method does not allow international customers to believe that the company's reputation is high or low, but on the contrary will be considered that the original price products are too profitable.

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