On April 14, 2026, the exchange rate of the Chinese yuan against the US dollar reached a three-year high of 6.8148.

As the owner of an export enterprise in Jiangsu and Zhejiang regions, Zhao Zhidong is facing a multiple-choice question: Poly Run or Protect Orders?

Starting from April, Zhao Zhidong began selling new Christmas bedding products (duvet covers, pillowcases, etc.) to numerous overseas customers and set a target of annual export sales of $350000. To maintain last year's export profit margin, I need to raise the price of bedding by about 4%, but many overseas customers will go to Southeast Asia for procurement. To retain these overseas customers, I cannot raise the price of bedding, and can only silently bear the 3% loss in foreign exchange settlement caused by the exchange rate rise, "he said.

After deducting exchange losses, the actual profit margin of his bedding export business is less than 3%. In order to maintain the operation of the enterprise, he currently prioritizes profit preservation and sacrifices some overseas orders. As the head of a small and medium-sized clothing and textile enterprise, Liu Jing is also facing a similar situation.

This invisibly becomes a microcosm of the "structural differentiation" of China's foreign trade export growth this year.

According to data from the China Chamber of Commerce for Import and Export of Textiles, the cumulative export of domestic textiles and clothing in the first quarter of this year was 67.08 billion US dollars, a year-on-year increase of only 1.2%.

On April 14th, data released by the General Administration of Customs showed that in the first quarter of this year, China's exports of goods reached 6.85 trillion yuan, a year-on-year increase of 11.9%; Among them, the export value of electromechanical products reached 4.34 trillion yuan, a year-on-year increase of 18.3%, accounting for 63.4% of the total export value of the quarter. Especially, the export of green products such as electric vehicles, lithium batteries, wind turbines and their parts increased by 77.5%, 50.4% and 45.2% respectively.

Behind the significant difference in export growth rates of different commodities is the high added value of mechanical and electrical products compared to the "new three types" of foreign trade products, which have relatively strong pricing power and can cope with exchange rate pressures with ease; By comparison, labor-intensive and low value-added traditional products such as clothing, furniture, and home appliances are being affected by the dual effects of rising RMB exchange rates and declining export pricing competitiveness.

New troubles for small and medium-sized export enterprises

Due to the considerable export sales of newly designed clothing in 2025, Liu Jing has set this year's business goal to achieve a year-on-year growth of 10% in clothing export business and an export amount of 1.1 million US dollars.

With the Canton Fair held in April, a large number of overseas customers are going to Guangzhou to purchase Christmas season clothing and stock up. She plans to seize this opportunity and sign as many overseas orders as possible.

After the outbreak of the US Israel Iraq War, the US dollar index rose rapidly. She once believed that she had received a "divine assist" - the rise of the US dollar would cause the RMB exchange rate to fall, which would help improve the price advantage of Chinese commodity exports and help her win more overseas orders.

However, human calculation is not as accurate as natural calculation.

Since March, with the evolution of the war situation, the exchange rate of RMB against the US dollar has ignored the strong rebound of the US dollar index, rising from 6.9 to around 6.81.

Liu Yang, Vice President of OCBC Bank China and General Manager of the Global Financial Markets Department, analyzed that the reason why the RMB exchange rate against the US dollar and the US dollar index have risen synchronously since March is because the US Israel Iran War has completely changed the investment logic of the foreign exchange market. An increasing number of global investment institutions are concerned that countries such as Japan and South Korea, which are highly dependent on Middle Eastern crude oil, are facing severe economic downward pressure and are bearish on their currencies; Compared to other countries, such as the United States and China, which are more confident in responding to the global energy supply crisis, have instead been sought after by financial markets, and their currency exchange rates have shown clear strength.

Faced with the continuous rise of the RMB exchange rate, Liu Jing finds it difficult to be happy.

In early April, she attempted to increase clothing pricing by 4% to cope with cost pressures caused by rising exchange rates. As a result, she found that about 30% of overseas customers turned to the Southeast Asian market to "compare prices".

Liu Jing thought to herself that these overseas orders are likely to stay in Southeast Asia because since the outbreak of the US Israel Iraq War, the currency exchange rates of Southeast Asian countries have fallen due to the rise of the US dollar, making local clothing exports more price competitive.

Over the past week, Liu Jing has called multiple overseas clients and informed them that "clothing prices remain the same as last year. If this year's purchasing volume is comparable to last year, there will be a 5% discount. But this means that she has to bear the exchange losses caused by the rise in the RMB exchange rate. Roughly estimated, the profit margin of these export orders is less than 1.3%, which is quite distressing, "Liu Jing admitted.

What makes her even more uncomfortable is the frequent collection of payments from upstream raw material suppliers.

As of mid April, 40% of Liu Jing's raw material procurement funds have not been settled yet. Originally, she planned to settle the foreign exchange and pay for the raw material procurement after receiving the US dollar payment for last year's clothing exports in late January this year. However, when she saw that the settlement amount was continuously shrinking due to the continuous appreciation of the RMB, she decided to postpone the settlement.

What she didn't expect was that since March, the exchange rate of the Chinese yuan against the US dollar has repeatedly reached new highs in three years, making her even more afraid to settle foreign exchange.

In mid April, Liu Jing could only negotiate with the supplier to extend the purchase payment settlement for another three months, and she was willing to pay a late fee of 1.5% annualized interest rate.

I have made a written guarantee to the upstream supplier that as long as the exchange rate of RMB against the US dollar drops to the level of 6.90-6.95, we will quickly settle the payment for the purchase, "said Liu Jing. Now, watching the trend of RMB appreciation continue, she is afraid of losing both her wife and her soldiers - she will have to bear a larger amount of foreign exchange losses and pay an additional late fee.

As the head of the corporate business department of a joint-stock bank's East China branch, Chen Qiang found that local home export enterprises were also worried.

In the first week of April, when he went to a local home manufacturing and export industrial park for research, many heads of small and medium-sized home export enterprises kept asking why the RMB exchange rate had continued to appreciate despite the escalation of international geopolitical risks since the outbreak of the US Israel Iran War in March, resulting in significant losses in their settlement amounts.

Due to the average payment term between home furnishing enterprises and upstream suppliers being 3-6 months, many small and medium-sized home furnishing export enterprises do not rush to settle their payments in US dollars by the end of 2025. Instead, they feel that they will wait for the RMB exchange rate to depreciate before settling their payments in order to earn substantial foreign exchange earnings. Now, facing the repeatedly high RMB exchange rate, they can only further delay the settlement of foreign exchange, leading to frequent reminders from upstream suppliers. During the research process, many leaders of small and medium-sized enterprises regretted not significantly increasing the forward foreign exchange lock up ratio (the proportion of foreign exchange hedging amount corresponding to the total foreign currency receipts of export business) at the end of last year, otherwise they would not have encountered the current troubles, "said Chen Qiang. The heads of these small and medium-sized enterprises calculated that if they had increased the forward exchange rate to 60% -70% in the fourth quarter of last year and locked the average settlement price of US dollars to Chinese yuan between 6.95-7 this year, their home export business profit margin could still reach over 4%. Whether it was settling funds with upstream suppliers or obtaining overseas orders, they would have been relatively calm.

Large enterprises remain calm

Compared to the troubles of small and medium-sized enterprises, large enterprises seem quite calm in the face of this wave of RMB exchange rate rise.

As the head of the external business department of a large domestic traditional product export trading enterprise, Zhang Chun is responsible for designing and executing the foreign exchange hedging scheme for the enterprise's export business.

He revealed that according to internal requirements of the enterprise, the foreign exchange hedging ratio of the enterprise must not be lower than the industry average level (30%). Therefore, they have increased the forward hedging ratio to 50% by the end of 2025. The other 50% of the foreign exchange risk exposure will also be purchased by the foreign exchange hedging team through foreign exchange options or 1-3 month foreign exchange swap transactions based on the trend of RMB exchange rate fluctuations, locking in a relatively acceptable range of settlement prices to ensure that the export business profits are less than 5% affected by exchange rate fluctuations.

Faced with the appreciation of the RMB, Zhang Chun can ensure that the profit margin of traditional product export business remains at 3.5% -4% by adopting a 50% forward exchange rate lock up ratio and locking the settlement price between 6.95-7.

Starting from March this year, he also required that for every new export contract signed, 60% to 70% of the contract amount be locked in at a settlement price above 6.9 through forward foreign exchange swap transactions or forward lock up operations.

Although the appreciation of the Chinese yuan has led to an increase of over 5% in forward exchange locking fees, Zhang Chun still believes that this operation is quite necessary.

I can sleep soundly every day without worrying about the continuous rise of the RMB exchange rate causing a decrease in the settlement amount and devouring most of the export business profits, "he said.

In Zhang Chun's view, behind the "calmness" of large trading enterprises is the establishment of professional foreign exchange hedging operation mechanisms and professional foreign exchange hedging teams, and the resolute implementation of relatively complete and scientific foreign exchange hedging assessment mechanisms. By comparison, small and medium-sized export enterprises are either constrained by their small business scale and inadequate internal control management, and have not yet established an operational mechanism for foreign exchange hedging; Either the "one-man" culture of business owners renders the foreign exchange hedging operation mechanism virtually non-existent.

In the past, we exchanged experiences with small and medium-sized export enterprises on foreign exchange hedging operations and found that they were more willing to use fund settlement as a means of income generation, frequently betting on the decline of the RMB exchange rate in order to gain more settlement income. However, in the actual operation process, there are almost no 'undefeated generals' who can bet on the trend of the RMB exchange rate every time, "Zhang Chun said.

This operation made Liu Jing quite envious. Recently, she took the initiative to approach the bank, hoping to design a corresponding forward exchange locking plan for her company's foreign trade orders in US dollars.

As a foreign exchange trader in the financial market department of a city commercial bank, Zhao Yong has over 6 years of experience in designing foreign exchange hedging schemes for export enterprises. He noticed that since April this year, the number of small and medium-sized export enterprises actively consulting for forward foreign exchange lock up has increased by more than 20% compared to the beginning of the year. These companies plan to increase the foreign exchange hedging ratio, such as forward exchange locking, from 10% to 20% to over 40%, in order to ensure that a considerable proportion of export business profits are not affected by exchange rate risks.

Wu Zewei, a special researcher at Su Shang Bank, pointed out that with the continuous rise of the RMB exchange rate, export enterprises are facing the dual pressure of exchange losses and decreased product price competitiveness, and their profit margins are being compressed. It is necessary to strengthen exchange rate risk management through foreign exchange hedging tools as soon as possible.

RMB Valuation and Settlement Contract

While actively retaining overseas customers, Zhao Zhidong is also working hard to persuade them to sign export contracts with products priced and settled in RMB.

This is a new method for small and medium-sized export enterprises to effectively avoid exchange rate risks, "said Zhao Zhidong. In the past, export products were priced and settled in US dollars. Once small and medium-sized enterprises received payment in US dollars and encountered a rise in the Chinese yuan exchange rate, they could only bear the exchange rate risk and loss of settlement amount on their own; Nowadays, if export products can be priced and settled in RMB, overseas buyers will use RMB to pay for goods, and the exchange rate risk that small and medium-sized export enterprises used to worry about will dissipate.

However, convincing overseas buyers to agree is not an easy task.

Zhao Zhidong found that Southeast Asian buyers have the highest acceptance rate; Compared to other regions, most buyers in the Middle East, Africa, Latin America, and other areas still prefer to use export contracts settled in US dollars for product pricing.

In order to persuade customers, Zhao Zhidong proposed multiple preferential measures, including agreeing to reduce the down payment of export contracts from 35% to 30%, and offering a 5% discount on export products priced and settled in RMB.

This move once caught the hearts of many buyers in Africa and Latin America. But after consideration, they still politely declined on the grounds of "habit". Later, Zhao Zhidong learned that these buyers did not know how to raise RMB.

Compared to Southeast Asia, where RMB liquidity is relatively abundant and RMB exchange operations are convenient, the current circulation of RMB in regions such as the Middle East, Africa, and Latin America is relatively low. In addition, many countries in these areas will take capital control measures during periods of severe fluctuations in their domestic currency exchange rates, resulting in cumbersome procedures for RMB exchange operations. Buyers are concerned that once they sign a purchase contract for products priced and settled in RMB, they may find it difficult to find payment in RMB and face the risk of payment default.

In order to solve this problem, many small and medium-sized export enterprises are making efforts to promote products that are priced and settled in RMB for export contracts, while also inquiring with banks about whether they can provide RMB trade financing support to overseas customers.

In practical operation, based on KYC (Know Your Customer) and credit risk management requirements, banks require the trading party to provide export credit insurance policies and other guarantee measures to increase creditworthiness. ?Zhao Yong pointed out. In recent years, there have been significant changes in the global foreign trade environment, which has put more pressure on banks to control risks in RMB trade financing.

In the past, Chinese export enterprises mainly faced large wholesalers and well-known retail chain enterprises as overseas buyers. Banks could quickly grasp the financial strength, performance status, and credit rating of these overseas large enterprises, assist trading parties in handling export credit insurance and other credit enhancement measures, and quickly issue RMB trade financing funds. Nowadays, with the increasing fragmentation of foreign trade, overseas buyers have become small and medium-sized wholesalers and overseas e-commerce buyers. Banks find it difficult to understand their financial status and credit ratings, and the risk control scale of related RMB trade financing has become cautious.Due to the fact that small and medium-sized export enterprises have just established business cooperation with these overseas buyers, they may not have a comprehensive understanding of their financial situation, which also increases the difficulty of RMB trade financing risk control for banks, "Zhao Yong said. They are communicating with local branches of China Export&Credit Insurance Corporation and other financial institutions, attempting to adopt digital technology to quickly and accurately understand the latest financial situation and past trade payment records of overseas buyers, innovate policy financing products, and create a better operating environment for small and medium-sized export enterprises and overseas buyers to carry out RMB pricing and settlement of products.

A new round of game

Zhao Zhidong hopes that from the second half of April, the exchange rate of the Chinese yuan against the US dollar will experience a slight correction.

In the past, overseas buyers would purchase Christmas bedding from April to May, and whenever the RMB exchange rate fell and brought corresponding "price advantages", they could always win many new orders from overseas customers.

However, he may be disappointed this time.

Liu Yang frankly stated that after the outbreak of the US Israel Iraq War, traditional safe haven tools such as gold, US Treasury bonds, and the Japanese yen were all overshadowed, with only the Chinese yuan and the US dollar becoming true safe havens. If this war is difficult to quell in the short term, the safe haven nature of the renminbi will continue to ferment, driving the renminbi exchange rate to continue rising. In addition, China's strong export growth and trade surplus have accumulated a large demand for foreign exchange settlement from enterprises, which will continue to support the RMB exchange rate.

When the exchange rate of RMB against the US dollar is above 6.9, there is a strong demand for corporate foreign exchange settlement, "Liu Yang said.

Chen Qiang has deep feelings about this. In his view, once the US Israel Iran war continues to escalate, the safe haven nature of the renminbi will inevitably attract more global capital inflows into renminbi assets, making the renminbi exchange rate more likely to rise and difficult to fall in the future. Recently, the daily transaction volume processed by the Chinese yuan cross-border payment system (CIPS) reached 122 trillion yuan, with nearly 42000 transactions, setting a new historical high, indicating that overseas funds have begun to choose RMB assets for hedging.

If I had known about the strong trend of the RMB exchange rate, I would have set the forward lock up ratio at 70% at the end of last year, instead of the current 15%, "said Zhao Zhidong.

There are also different opinions in the financial industry about whether the exchange rate of RMB against the US dollar can continue to rise.

A state-owned foreign exchange trader stated that by analyzing the trend of the CFETS RMB index over the past 4-5 years, when the CFETS RMB index hits the 101.5 line, relevant departments will take measures to curb the rapid unilateral rise of the RMB exchange rate. As of the week of April 10th, the CFETS Renminbi Index has risen to the level of 100.25.

Starting from March 2nd this year, the People's Bank of China has lowered the foreign exchange risk reserve ratio for forward foreign exchange sales from 20% to 0%, significantly reducing the cost of domestic foreign exchange hedging for enterprises and driving a new balance in the supply and demand relationship of foreign exchange settlement and sales in the market.