Sep 22, 2026Buying Guides
How RMB appreciation affect the profits of home appliances' factory in China?
How RMB appreciation affect the profits of home appliances' factory in China?
How RMB appreciation affect the profits of home appliances' factory in China?
Let's start with the concept: "The depreciation of the US dollar against the RMB" = 1 US dollar can exchange for fewer RMB = appreciation of the RMB. For export enterprises, it is not that "things become cheaper and sell better", but that the US dollar income converted back to RMB becomes less, so the short-term situation is usually a pressure. 1. Impact on general foreign trade export enterprises: 1. Direct mechanism - If the export quotation is 100 US dollars: - Exchange rate 7.20 → Receiving 720 RMB - Exchange rate 7.00 → Receiving 700 RMB - Exchange rate 6.80 → Receiving 680 RMB - Costs are paid in RMB (labor, factory, some components), and income is received in US dollars. The appreciation of the RMB will compress the gross profit. 2. The impact on profit is greater than that on income for many foreign trade enterprises. The net profit rate of many enterprises is only 3% - 8%. A 1% - 3% change in the exchange rate may eat up the profit. - Those who have received long-term US orders but have not locked the exchange rate: The income shrinks when settling the exchange rate → "Not making money from the order" - Those with US accounts receivable: A currency exchange loss is generated on the books - Those with US liabilities: They actually benefit (debt repayment costs decrease) 3. Impact on orders and competitiveness - If not raising prices: Profits are eaten up - If overseas customers accept the price increase: They may cancel the order - Competitors in Southeast Asia, Mexico, etc. whose local currencies have not simultaneously appreciated → The price advantage of Chinese products weakens 4. Industry differences - Textiles, toys, low value-added OEM: The worst, with weak bargaining power - Electrical machinery, home appliances, auto parts: Medium, relying on scale/brand/hedging buffers - High value-added, own brand, overseas factories: The strongest resilience 5. Common hedging methods used by enterprises - Forward foreign exchange settlement and sale, foreign exchange options, swaps - Cross-border settlement of RMB - US/dual currency quotations + exchange rate adjustment clauses - Overseas local production, local currency settlement - By 2025, the proportion of enterprises' foreign exchange hedging has risen to approximately 30% 2. Overall impact on home appliance exports: Appliances have the attribute of "electrical machinery + consumer manufacturing": - Export is quoted in US/Euro - Cost ends such as copper, aluminum, steel, plastic, chips are priced in RMB or US dollars - Leading enterprises have brands, overseas factories, hedging; small OEMs are very passive The core of the RMB appreciation/dollar depreciation for home appliances is: Exports' gross profit margin is under pressure + exchange rate fluctuation + Difficulty of raising prices overseas In the first half of 2026, the RMB rose from approximately 7.02 to 6.81, and the home appliance sector experienced: - Financial expense ratio increased - The profit of export-oriented small home appliances declined significantly - The leading enterprises rely on hedging and overseas production capacity to smooth fluctuations 3. Characteristics of major appliances (air conditioners, refrigerators, washing machines, televisions) - Single unit value is high - The leading enterprises are concentrated: Midea, Haier, Gree, Hisense, TCL - Some enterprises already have overseas production capacity in Southeast Asia, Mexico, Egypt, etc. - Brand premium and channel control power are strong When the US dollar depreciates: - The US dollar quotation remains unchanged → RMB income decreases - If raising the US dollar price → Overseas customers/circuits will resist, but compared to small appliances, they have more confidence - Profit margin slightly under pressure - Exchange loss may occur, but leading enterprises use hedging to smooth it - Overseas factories can use local currency to calculate costs, reducing the exposure of "RMB appreciation, profit contraction" Conclusion: Major appliances: Income can still hold up, profits are disturbed, but the leading enterprises have obvious resilience; Small and medium-sized home appliance OEMs are more uncomfortable. In Q2 2026, the profit margin of home appliances only slightly decreased by about 0.4 percentage points, Midea even grew against the trend, indicating that the leading enterprises have a stronger ability to resist exchange rate fluctuations. IV. Characteristics of Small Household Appliances (Electric Rice Cookers, Air Fryers, Vacuum Cleaners, Personal Care Products, Cleaning Appliances, Kitchen Small Appliances) - Low unit price, numerous SKUs, intense competition - A large number of enterprises are engaged in ODM/OEM manufacturing - Customers are Amazon sellers, overseas brands, and supermarket purchasers - Weak bargaining power, "Whoever offers the lowest price gets it" - When the US dollar depreciates, it is difficult for overseas customers to accept price increases - A 1% increase in exchange rate may lead to a 0.5-0.7 percentage point drop in export gross profit - Factories with a profit margin of 3%-5% may suffer direct losses - Small household appliance manufacturers such as Xianbao, Leke, Oshun, and Hongzhi are subject to triple pressure from exchange rate, tariffs, and raw material costs, but there is also differentiation within the industry - Cleaning appliances, vacuum cleaners, and smart small appliances: Stone, Kovo, and Zuiwei have brands and growth, and can partially transfer the impact - Traditional kitchen small appliances and personal care small appliances: have a strong OEM attribute, and are the most passive - Cross-border e-commerce spot orders: the exchange rate buffer is almost zero, and profit contraction is the fastest. Conclusion: Small household appliances are the sub-sector most affected by the depreciation of the US dollar in the appliance industry, especially those factories with "OEM + low average order value + long-term contracts + no hedging". V. Comparison of One Sentence Types - Exchange Rate Sensitivity, Pricing Ability, Hedging/Overseas Production - The impact of the depreciation of the US dollar on textile/ toy OEM - Extremely high - Very weak - Weak - Profits are eaten up - Small household appliances: ODM high, strong, medium/weak, significantly under pressure - Mainstream home appliance leaders: medium-strong, strong, profit disturbance but controllable - Brand-owned and overseas factories: medium-low, strong, strong, less impact - VI. How Enterprises View "Good or Bad" During the period of the depreciation of the US dollar: - ✅ Those with US dollar liabilities, high import cost proportion, overseas local production, and high proportion of RMB settlement: relatively benefited or less vulnerable - ❌ Pure export OEM, large amounts of US dollar accounts receivable, long-term contracts locked in price, no hedging, strong customer bargaining power: the most affected - ⚠️ Leading enterprises may not "make money from exchange rate", but they can survive better than small factories, and even seize market share opportunistically VII. Summary The depreciation of the US dollar against the RMB = appreciation of the RMB: 1. Chinese export enterprises' US dollar income converted to RMB decreases 2. Low value-added/ OEM enterprises' profits explode first 3. Overall export gross profit margin and exchange rate end pressure of home appliance industry 4. Mainstream home appliance leaders rely on brand, scale, hedging, and overseas factories to withstand 5. Small household appliance OEM enterprises are the most sensitive, traditional kitchen small appliances/ personal care small appliances are under the most pressure, and cleaning/ smart small appliances are slightly better If you wish, I can create another version: "When the US dollar rises from 7.2 to 6.8, a profit calculation table for an air conditioner/ air fryer".
