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It’s like a nuclear bomb!Biden printing $1.9 trillion like crazy!Clothing and all foreign trade enterprises involved!

Garment Foreign Trade Enterprise 1

Just now, Trump has officially delivered his farewell speech, and Biden will be officially inaugurated.Even before he took office, he had his stimulus plan in place.

Joe Biden is printing $1.9 trillion like a nuclear bomb!

On the evening of January 14, US President-elect Joe Biden unveiled a $1.9 trillion economic stimulus plan aimed at dealing with the impact of the outbreak on families and businesses.

Details of the plan include:

● A direct payment of $1,400 to most Americans, with $600 in December 2020, bringing the total amount of relief to $2,000;

● Increase federal unemployment benefits to $400 a week and extend them through the end of September;

● Raise the federal minimum wage to $15 an hour and allocate $350 billion in state and local government aid;

● $170 billion for K-12 schools (kindergarten through grade 12) and higher education institutions;

● $50 billion for the Novel Coronavirus test;

● US $20 billion for national vaccine programmes.

Biden’s bill would also include a series of increases to the family tax credit, allowing parents to claim up to $3,000 for each child under age 17 (up from $2,000 currently).

The bill also includes more than $400 billion dedicated exclusively to fighting a new pandemic, including $50 billion to expand CoviD-19 testing and $160 billion for national vaccine programs.

In addition, Biden called for $130 billion to help schools open safely within 100 days of the bill’s passage.
Another $350 billion would go to aid state and local governments facing budget shortfalls.

It also includes a proposal to raise the federal minimum wage to $15 an hour and to fund child care and nutrition programs.

In addition to the money, even rent water and electricity management.
It would also provide $25 billion in rent assistance to low – and middle-income families who lost their jobs during the outbreak, and $5 billion to help struggling tenants pay utility bills.

The “nuclear power printing machine” of the United States is about to start again. What impact will the flood of 1.9 trillion US dollars have on the textile market in 2021?

Garment Foreign Trade Enterprise 1

The RMB exchange rate has continued to appreciate

Under the influence of the new epidemic, the United States has caused huge losses to its national economy due to its ineffective anti-epidemic and industrial hollowing out. However, due to the special status of the dollar in the world, it can “transfusion” the domestic people through “printing money”.

But there will also be a chain reaction, most immediately affecting the exchange rate.

The RMB exchange rate against the US dollar has appreciated significantly in the past few months, breaking 6.5 in early 2021.
Looking ahead to 2021, we expect the renminbi to remain strong in the first quarter.
In the “spread + risk premium” framework, we expect risk premiums to fall further, and the real interest rate spread measured by the Fed’s shadow interest rate is unlikely to narrow in the near term after the fears of “premature quantitative tapering” in the US are settled by Fed Chairman Colin Powell.
In addition, in the short term, China’s exports are strong to support the RMB, and historical experience shows that the Spring Festival effect will also push up the RMB exchange rate.
Finally, the weak dollar in the first quarter also helped keep the yuan relatively strong.

Looking further ahead, we expect some of the factors supporting yuan appreciation to weaken.
On the one hand, the phenomenon of “strong exports and weak imports” cannot be sustained after global resonance recovery, and the current account surplus will narrow the probability.
On the other hand, the spread between China and the US may narrow after the vaccine is rolled out.
In addition, the dollar will also face greater uncertainty beyond the second quarter.
At the same time, we expect Biden to focus on domestic issues in the early days of his administration, but to remain focused on the Biden administration’s stance and policies toward China in the future. Policy uncertainty will exacerbate exchange rate volatility.

Garment Foreign Trade Enterprise 2

There has been an “inflationary” rise in the price of raw materials

In addition to the macro appreciation of RMB against the US dollar, the US $1.9 trillion will inevitably bring great inflation risk to the market, which is reflected in the textile market, namely the rise in the price of raw materials.

In fact, since the second half of 2020, due to “imported inflation”, the price of all kinds of raw materials in the textile market has begun to rise. Polyester filament has risen by more than 1000 yuan/ton, and spandex has risen by more than 10000 yuan/ton, which makes the textile people call it unbearable.

The raw material market in 2021 is likely to be the continuation of the second half of 2020. Drived by capital speculation and downstream demand, textile enterprises can only “go with the flow”.

There may be no shortage of orders, but…

Of course, it is not without a good side, at least after the money sent to the hands of ordinary Americans, their spending power will be greatly enhanced.
As the world’s largest consumer market, the importance of the United States for clothing people is self-evident.

The $1.9 trillion has not been handed out yet, and many foreign trade enterprises have already received orders.

In Europe and the United States, it’s still Wal-Mart or Carrefour or H&M or Zara, a big supermarket or clothing brand.
Orders from these brands are hardly sporadic, often leading to a peak season.

In 2021, apparel companies don’t have to worry too much about a lack of demand in the U.S. due to a downturn in the economy and a lack of money.
With the “nuclear money printing machine” in place, as long as the epidemic is contained, there will be no shortage of orders.

Garment Foreign Trade Enterprise 3

Of course, this also contains certain risks. Both the China-US trade friction in 2018 and the recent measures to ban Xinjiang cotton show some hostility of the US to China. Even if Trump is replaced by Biden, the problem is difficult to be fundamentally solved, and the risks should be careful.

In fact, you can see it in the shape of the clothing market in 2020.
In the special environment of 2020, the polarization of clothing enterprises is becoming more and more serious. Enterprises with core competitiveness are even more prosperous than in previous years, while some enterprises without bright spots have suffered a major blow.

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Business Director at Shanghai Fumao Clothing Co.,LTD

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