Survey in the Yangtze River Delta: *** “Ten Lian Yang” textile companies that are not in disorder are more worried about rising costs

In the first trading day of 2011, the inter-bank market exchange rate of the Chinese yuan (CNY) against the U.S. dollar was reported at 6.6215, marking a rise for ten consecutive days and reaching its highest level since the currency reform in July 2005. While this trend has been notable, it pales in comparison to the sharp appreciation seen in September and October of the previous year. Despite the ongoing "Ten Lian Yang" (a term used to describe sustained appreciation), more than 10,000 export companies in Yu Cheng seem to be handling the situation with greater composure. Companies are not only focused on the impact of exchange rate fluctuations but are also taking proactive measures to manage risks. “By locking in the forward exchange rate early, we can avoid potential losses from volatility,” said Xu Zhe, general manager of Ningbo Textiles Import & Export Co., Ltd. “For example, a 0.6% fluctuation over 10 days could lead to a $12,000 loss on a $2 million transaction. But because we locked the rate at the start of the order, we’re now more confident.” According to data from the Bureau of Foreign Trade and Economic Cooperation, the city’s total import and export volume reached $75.047 billion as of November 2010, reflecting a 38.4% year-on-year increase. Exports alone rose by 36.8%, showcasing strong performance despite various pressures. Experts suggest that the yuan's appreciation is entering a strategic phase, with some analysts predicting a 5% annual rise in 2011. This expectation has prompted companies to adopt more advanced financial tools to hedge against exchange rate risks. Wu Chen from the Bank of China’s Ningbo Branch explained that companies have learned to anticipate major events, such as U.S.-China conferences or international meetings, which often precede currency movements. By using forward settlements, they can better plan their financial strategies. However, the challenges go beyond just exchange rates. Rising costs of raw materials—such as gold, oil, and non-ferrous metals—have significantly increased production expenses. Inflation has also pushed up prices and living costs, contributing to a new labor shortage issue. These factors make it harder for companies to maintain profitability. Mao Xinbin from the city’s Foreign Economic and Trade Bureau noted that while the yuan’s annual appreciation of 3% may seem modest compared to other Asian countries, external pressures—like Brazil’s criticism of China’s currency policy—could accelerate the pace of appreciation. As companies prepare for a long-term trend of yuan appreciation, they must also focus on optimizing their order management. Ding Ying, general manager of Taiping Bird Import & Export Co., Ltd., emphasized the importance of strict cost and profit calculations. With production cycles typically lasting 2–3 months, businesses need to plan carefully to minimize risk. While exchange rate fluctuations can be mitigated through financial instruments, the broader economic environment remains challenging. Overcapacity in many industries has led to funds flowing into non-productive sectors, further complicating the landscape. Despite government efforts to control inflation, rising costs continue to weigh heavily on both companies and employees. In this complex scenario, businesses must remain agile, adaptive, and forward-thinking to navigate the evolving global economic environment.

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