Analysis of the Impact of the Downgrading of American Credit Rating on Foreign Trade Enterprises

The butterflies on the shore of the ocean wave their wings, and countries across the ocean may cause a hurricane. The reduction of the US credit rating has triggered a global butterfly effect. A series of economic chain reactions have been transmitted to all corners of the world through the stock market, foreign exchange market, and commodity trading market. China's foreign trade companies have also faintly felt the chill.

The RMB exchange rate against the U.S. dollar is accelerating towards the “5 eras”

On August 6, Standard & Poor's, one of the three major international rating companies, announced that it lowered its US sovereign credit rating from AAA to AA+, with a negative rating outlook. It is reported that this is the world's largest economy and the United States was lowered for credit ratings for the first time.

S & P lowered the US sovereign debt credit rating, bear the brunt of the negative impact on China's foreign trade companies. Since the outbreak of the U.S. debt crisis, the central parity of the renminbi against the U.S. dollar has hit new highs. It broke through 6.4 on August 11 and entered the “6.3” era.

According to data released by the People's Bank of China authorizing the China Foreign Exchange Trading Center, the median exchange rate of the RMB against the US dollar on August 31 was 638.67. In all 23 trading days in August, the exchange rate of the renminbi reached a record high since the exchange reform. Experts said that the exchange rate of the renminbi against the US dollar is accelerating towards the "5 times."

The appreciation of the renminbi has hurt foreign trade companies. “If the renminbi appreciates by 1%, the company’s profits will be reduced by about 5%. Therefore, the company is very cautious when it comes to orders. It is basically 'short-listed, short-selling, and large-scale'.” Bai Hui, executive director of Baidi Import & Export Co., Ltd. said.

"I'm only about the door when the dollar devaluates again."

Qin Hong is a manufacturer of golf clubs, shoes and other sports products used in Dongguan. After five years of operation, the factory experienced financial turmoil, last year's prosperity, and the market downturn that began this year. “I've been here before. This is a lot of pressure.” “I'm facing two problems now. One is that the buyer has to withdraw the bill. The biggest worry is that the dollar is devaluing again. This is for manufacturers working in the U.S. market. Are fatal.

Rigid consumer products such as textiles and garments are hard to keep up with in the future

Economists point out that even rigid consumer products such as textiles and clothing are hard to keep up with. In order to reduce the fiscal deficit, the U.S. government will increase taxes, consumers' disposable income will be reduced, and consumer goods, including apparel, may be affected.

Recall that in 2008, the financial crisis once caused the global textile and apparel consumer market to bottom. Unemployment rate increases and income tightening makes consumers unwilling to spend too much on apparel products. Many textile manufacturers suffer huge losses due to poor product sales.

The far-reaching impact is that if the United States implements an export strategy and suppresses imported products, it will inevitably lead to a further rise in U.S. trade protectionism and increase the friction in international trade.

Pakistan analysts expect that the U.S. debt crisis will not have a major impact on Pakistan’s textile exports, but rising costs will make it difficult for the country’s manufacturers to find a competitive advantage in the depressed U.S. market. Affected by factors such as cotton price fluctuations and energy crisis, Pakistan’s textile industry’s operating burden has increased this year. Compared with the previous year, Pakistan’s textile industry’s manufacturing costs have increased by more than US$1 billion. There is widespread concern in the industry that Pakistan’s garment exports will continue to decline this year.

Some export companies in China have also stated that orders from the US market have not yet been strongly affected. The current orders of enterprises are basically determined at the beginning of the year, and the volume of orders is also in October, but they are not optimistic about the trend of the US market. "It may be like the financial crisis in 2008. It didn't feel too much at the beginning, but orders have been declining until the second half of 2009. It seems that next year's orders need to be planned early." The person in charge of the textile export company said.

Experts: Exporting companies are more difficult or difficult

Lin Jiang, a professor at Lingnan College of Sun Yat-sen University, believes that the decline in sovereign credit ratings means that the United States needs to raise more costs. In order to maintain its own profits, US companies either compress orders or reduce the price of orders, and these two cases are for OEM companies. Nor is it a good thing.

The far-reaching influence comes from the depreciation of the dollar caused by the decline in sovereign credit ratings. “If the dollar continues to depreciate and the yuan is forced to appreciate, the dollar earned by an export company with a meagre profit would be worthless.” Once the yuan is appreciated, foreign companies will turn their attention to cost when they look for OEMs. Cheap Vietnam, India and other countries.

In addition, if the US dollar continues to depreciate, it will also cause greater international inflationary pressures. Crude oil, precious metals, and other raw material prices settled in US dollars will continue to climb.