How does yuan price reduction affect garment, footwear industries?
The sudden depreciation of Chinese yuan against the US dollar brings more difficulties to Vietnam’s yarn industry, according to Vietnam Textile and Apparel Association (VITAS).
A worker of Dinh Vu Polyester Fibre Plant in the northern port city of Hai Phong
Vietnam imports cotton from the US to make yarn products for export to China.
If the yuan continues to fall, Vietnam's yarn producers will continue to facedifficulties, the association said.
VITAS Chairman Vu Duc Giang told the Vietnam News Agency that due to theUS-China trade war, in the period from May to September 2018, Vietnam yarnexport price to China dropped from an average of 3.05 USD to 2.99 USD per kilo,down by 1.97 percent, causing average yarn export value each month to decreaseby 2.5 percent.
According to experts, the US-China trade saw Chinese yarn importers buy theminimum quantity to meet manufacturers’ demand.
Giang said Vietnam yarn exports had been mainly shipped to China, accountingfor more than 60 percent of total annual yarn export value to the world. Vietnamis also one of China’s major yarn suppliers, with a continuously growing marketshare.
In 2014, Vietnam ranked third in China's yarn import markets, after India andPakistan. In 2017 and 2018, Vietnam rose to the first place, accounting for 30 percentof China's yarn imports, higher than both India and Pakistan.
The Dam San Joint Stock Company’s representative said in the past, the companysold 1,400 tonnes of yarns to China, but now the volume was declining sharplyand even in September, it would not have export contracts to sign.
According to some enterprises, Chinese partners have pressured firms to reducefurther import prices.
Other markets such as the Republic of Korea, Japan, Egypt, Turkey, the Philippinesand Taiwan still have orders but only small quantity.
They also face fierce competition from domestic foreign-invested (FDI)enterprises and businesses from competing countries such as India, Thailand,Indonesia, and Pakistan to get contracts.
The selling price is still on a downward trend and there is no sign ofrecovery, while China has launched a large amount of cotton stockpiles, which makescotton prices fall sharply.
The Vietnam Yarn Association said this year, the export volume of Vietnameseyarn industry would reduce by 10-15 percent year on year and the selling pricehad also dropped from 3.5 USD to 2.8 USD per kilo at present. Therefore, theindustry could suffer no less than 500 million USD.
Meanwhile, Phi Viet Trinh, General Director of the Ho Guom Garment Group, saidhis company exports to Europe, Japan and the Republic of Korea who pay in USdollar so the depreciation of yuan would not have much effect on his group.
Than Duc Viet, General Director of the May 10 Corporation, also said the May 10had not had much export volume to China and its payment was mainly in US dollarso it would not be affected much by the yuan depreciation.
For the domestic leather and footwear industry, Phan Thi Thanh Xuan, SecretaryGeneral of the Vietnam Leather and Footwear Association (Lefaso), saidenterprises had to import many raw materials from China. However, thesecontracts mainly came from large-scale businesses and foreign direct investmentfirms so the payment for the contracts were in US dollar.
Lefaso was following developments in import and export activities of theindustry to be able to inform its members, especially in the last quarter whenthe enterprises promote production meeting higher demand for holidays.
The sudden depreciation of Chinese yuan against the US dollar brings more difficulties to Viet Nam’s yarn industry, according to Viet Nam Textile and Apparel Association.
A currency war could break out among a number of countries, Nguyen Tri Hieu, a finance expert told the press recently.
China’s yuan (renminbi) has remained above the sensitive level of seven to the US currency for the last three days, hinting that trade friction between the US and China is entering a dangerous phase.