The RMB continues to strengthen. How can bearing export enterprises cope with the new situation of exchange rates?
Recently, the RMB has been strengthening against the US dollar, and it has surpassed the 6.80 mark in late May. For bearing enterprises that mainly rely on exports, this change is reshaping the profit landscape – export orders have not decreased, but the money on the books has “shrunk”. This article, from the perspective of foreign customers, dissects the pain points and provides coping strategies.
Recently, the trend of the RMB exchange rate has attracted much attention from the market. On May 28th, the People’s Bank of China authorized the China Foreign Exchange Trading Center to announce that the central parity rate of the RMB in the inter-bank foreign exchange market on that day was 1 US dollar to 6.8240 RMB. Since the beginning of the year, the RMB has appreciated by more than 7% against the US dollar. In the middle and late of May, the exchange rate of the US dollar against the RMB even dropped below the key psychological level of 6.80. Deutsche Bank recently raised its forecast for the RMB exchange rate, expecting that by the end of 2026, the exchange rate of the US dollar against the RMB might rise to 6.55.
This round of the appreciation of the RMB was driven by multiple factors: the stabilization and recovery of the domestic economic fundamentals, the temporary weakening of the US dollar index, the continuous expansion of the trade surplus, and the amplification of the appreciation effect by enterprises’ concentrated foreign exchange settlement.
?? Bearing Exports: The “Scissors Difference” Between Growth in Orders and Profit Compression
The latest industry data shows that from January to March 2026, China’s bearing exports were approximately 211,900 tons, with a year-on-year increase of 3.3%; the export value was approximately 1.232 billion US dollars, with a year-on-year increase of 1.8%. From the quarterly data, the export volume of bearings increased by 16% year-on-year in January-February, and the export value increased by 11.3% year-on-year, but in March, the export volume decreased by 22.2% year-on-year, and the export value decreased by 16.2% year-on-year.
Demand has shown some signs of recovery, but the profit margin is being eroded by exchange rate fluctuations. The profit of export enterprises can be simplified as “foreign currency income × exchange rate for settlement – RMB cost” – an appreciation of the RMB means that the same amount of US dollars, when converted into RMB, results in a lower amount, while domestic production costs are relatively rigid in RMB terms, thus squeezing the profit margin.
?? Three major pain points for overseas customers
Pain point one: “Invisible increase” in procurement costs
For foreign customers who purchase Chinese bearings in US dollars or other foreign currencies, an appreciation of the RMB means that, at the same foreign currency price, the actual amount of foreign currency they pay remains unchanged, but when converted into domestic currency, it increases relatively – if the domestic currency of the customer is also weak against the US dollar, this “double exchange rate pressure” will further increase the procurement cost. A depreciation of the RMB theoretically benefits export price competition, but currently the RMB is in an appreciation trend, and the strengthening of the actual exchange rate directly reduces the purchasing power of foreign customers.
Problem 2: The difficulty of negotiating order quotations has increased.
The appreciation of the RMB has led to a narrowing of the RMB-based profits of Chinese bearing enterprises. Some of these enterprises have already faced the predicament of “increased revenue but no increase in profits” – although the export volume has grown, the net profit has not risen accordingly. Under this circumstance, Chinese enterprises may attempt to raise their US dollar quotations to maintain their profit levels, but the decision to adjust the prices often faces strong resistance from foreign customers, and the price negotiations have reached a deadlock.
Problem 3: Uncertainty in exchange rate fluctuations undermines the stability of cooperation.
The frequent fluctuations in exchange rates have increased the unpredictability of long-term cooperation between the two parties. For foreign customers who have signed long-term contracts, the uncertainty of exchange rates makes it difficult for them to accurately calculate the procurement cost budget. Some analyses suggest that when the RMB depreciates, overseas customers tend to ask enterprises to lower the order prices; when the RMB appreciates, Chinese enterprises then face profit compression – this asymmetrical game makes long-term cooperation more difficult to negotiate.
??️ Strategies for overseas customers
Strategy 1: Promote cross-border RMB settlement to lock in exchange rate costs
In recent years, more and more foreign trade enterprises have actively signed contracts with overseas clients in RMB. This is an effective way to avoid exchange rate risks. The Ministry of Commerce, the People’s Bank of China, and the State Administration of Foreign Exchange jointly issued a document, encouraging enterprises to use cross-border RMB pricing and settlement to avoid exchange rate risks, and supporting banks in simplifying the settlement procedures. For foreign customers, using RMB for settlement can directly eliminate the uncertainty of the exchange process and lock the procurement cost at the level at the time of signing the contract.
Strategy Two: Make effective use of financial derivatives to hedge against exchange rate risks
Foreign customers can utilize financial tools such as forward exchange settlement and sale, and foreign exchange options to lock in the exchange rate for settlement in advance. This enables them to convert the uncertain exchange rate risks in the future into certain procurement costs. For instance, by purchasing a put option on the US dollar to secure the bottom line of depreciation, and selling a call option to reduce costs, they can retain the flexibility when the exchange rate rises while controlling the downside risks.
Strategy Three: Establish an exchange rate-linked pricing mechanism
It is suggested that foreign customers and Chinese bearing suppliers include an elasticity clause for exchange rate fluctuations in the contract terms, stipulating that when the exchange rate exceeds a certain fluctuation range, both parties shall share the cost changes in the agreed proportion. For high-value-added bearing products, the supplier can appropriately increase the price by 5% – 10% based on technical barriers to transfer the cost; for standard products, it is more suitable to adopt the exchange rate sharing clause. This flexible price linkage mechanism helps maintain a long-term stable cooperative relationship.
Strategy Four: Shorten the payment and collection cycle and optimize cash flow management
Shortening the sales collection period is one of the effective measures to deal with exchange rate fluctuations. Foreign customers can negotiate with Chinese suppliers to shorten the payment period, thereby reducing the risk exposure of exchange rate fluctuations during the receivables cycle. At the same time, they can adjust the procurement rhythm dynamically according to the exchange rate trend and arrange orders in advance during the relatively favorable window period.