A Brief Analysis Of The Exchange Rate Changes Impact On Exports
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- Issue Time
- Sep 24,2024
Summary
From the latest Federal Reserve interest rate policy in 2024 and the changes in the exchange rates between China and the United States, we will briefly analyze the reasons and provide cooperation suggestions for our export customers, aiming to help customers better understand and strengthen cooperation.
In response to various economic challenges, including inflation and slowing growth, the Federal Reserve has implemented a series of interest rate adjustments. Recently, the Fed has chosen to cut interest rates to stimulate the economy. This monetary easing usually leads to a depreciation of the US dollar, and historically has often led to an appreciation of the RMB. At present, the RMB has appreciated against the US dollar, and has gradually risen from the previous exchange rate of about 7.4 RMB to 1 US dollar to 7.02 RMB to 1 US dollar, and there is an expectation of continued appreciation.
Reasons for this trend include:
Weaker US dollar
The Fed's interest rate cuts have reduced the attractiveness of US dollar-denominated assets, prompting investors to seek other currencies with higher returns, including the RMB.
China's economic resilience
Despite global uncertainties, China has shown a strong economic recovery, and government policies support stable growth.
Increased export demand
A stronger RMB is usually associated with a more competitive export market, and the quality and innovation of Chinese goods can fetch higher prices worldwide.
However, the appreciation of the RMB has also brought new expected challenges to our foreign partners. For the same RMB price, when converted into US dollars, customers will pay more US dollars, especially in price-sensitive markets.
To promote customer cooperation and effectively support customers in responding to these changes, we can adopt several strategies:
Transparent communication and early order confirmation
Open discussions on how currency fluctuations affect pricing and product supply are essential. By keeping customers informed, we build trust and enable them to make informed purchasing decisions. Compared with the RMB, which may continue to appreciate, for customers with clear needs, it is recommended to confirm contracts in advance to lock in an exchange rate that is more favorable for importing from China.
Flexible payment options
We have introduced payment terms denominated in RMB, which can reduce the impact of currency fluctuations on customers while providing them with clearer budget options.
Customized solutions
Working closely with customers to understand their specific needs can lead to customized solutions that take into account the impact of RMB appreciation. Providing options for bulk orders and long-term contracts can enhance stability for both parties.