Research on the Impact of RMB Exchange Rate Fluctuations on China's Textile Exports

Abstract

In recent years, following the exchange rate reform of July 2005, the renminbi’s exposure to exchange rate risk against the US dollar has expanded significantly, profoundly affecting the Chinese economy. Existing work on exchange rate shocks has tended to operate at the aggregate level, leaving the more granular risks—those bearing on industrial structure and employment—underexplored. This gap motivates the present study, which narrows its focus to the textile export sector. By combining theoretical modeling with empirical analysis, the paper seeks to quantify how exchange rate risk differentially affects the operational performance of firms in this industry. The results indicate that exchange rate fluctuations have materially heightened uncertainty within the sector, with tangible implications for both day-to-day business decisions and longer-term strategic planning. In response, the paper argues for a coordinated approach spanning four dimensions: strengthening risk management at the firm level, improving macro-level industrial planning, deploying targeted government policy support, and leveraging the advisory and service functions of industry associations. The underlying premise is that only by aligning efforts across these dimensions can the textile industry build genuine resilience to exchange rate risks—and, by extension, sustain the stable growth of foreign trade.