How Does RMB Appreciation Affect the Pricing of Chinese Export Goods? What Does It Mean for the Fertilizer Sector?

Early 2026: The RMB exchange rate stands at a new threshold.

Looking back at 2025, the Renminbi demonstrated strong performance against the US dollar. For the full year, the onshore RMB rate strengthened from 7.2988 to 6.9890, an appreciation of over 4.2%. The central parity rate was adjusted upward by a total of 1,596 basis points, briefly breaking through the 7.0 mark to hit a two-year high.

For international procurement professionals, exchange rates are never just a numbers game. They are a core variable that directly impacts procurement costs, profit margins, and even supply chain stability. As the RMB enters an appreciation channel, the pricing logic for "Made in China" goods on the global market is being fundamentally reshaped.

This article will break down: How does RMB appreciation affect the pricing of Chinese exports? What are the specific implications for the fertilizer industry? And how should you, as a buyer, respond?

Part I: RMB Appreciation - The "Invisible Hand" Behind Export Prices

To understand how exchange rates impact trade, you must grasp one core concept: the currency mismatch between costs and settlement.

The cost structure of Chinese export companies is denominated in RMB—worker salaries, domestically sourced raw materials, utilities, and rent are all paid in RMB. However, their sales revenue is largely settled in US dollars. When companies convert those dollars back into RMB, the exchange rate becomes the critical factor determining final profit.

RMB appreciation means that for the same export order, the company ends up with fewer RMB.

Take the textile and apparel industry as an example. This traditional, labor-intensive sector has long had an export dependency ratio of over 50%. Research indicates that for every 1% appreciation of the RMB, the industry's sales profit margin typically falls by approximately 1 to several percentage points. In 2025, the dollar-denominated value of textile and apparel exports was approximately $293.77 billion, a modest year-on-year decrease of 2.4%. In coastal processing enterprises reliant on European and American orders, exchange losses are beginning to approach-and even erode-their already thin profit margins.

A Real-World Case Study: A state-owned enterprise primarily engaged in fertilizer sales had an annual export volume of about $150 million. Its fertilizer business had high volume but razor-thin profits. In the second half of 2017, sustained RMB appreciation caused significant losses-shortly after signing export orders, the exchange rate fell below the cost price. By the time they received payment and conducted spot settlement, the orders resulted in substantial losses. It wasn't until 2018, under bank guidance, that the company changed its internal assessment methods, began comparing exchange rates against order costs, and timely locked in rates. By 2021, it had accumulated $104 million in forward settlement transactions, effectively hedging its currency risk.

The transmission mechanism is clear: when RMB appreciation compresses export profits, Chinese companies face three choices-

1. Raise USD quotes: Passing the currency cost onto overseas buyers.

2. Absorb the loss: Maintaining market share by sacrificing profit.

3. Optimize costs: Digesting pressure through relocation, workforce reduction, or efficiency gains.

For buyers, the most direct impact is the increase in procurement costs resulting from the first option.

Part II: A "Temperature Gradient" in the Supply Chain - Not All Exports Feel the Same Heat

It's important to note that the impact of RMB appreciation on export prices isn't uniform. Within China's vast industrial system, a company's position in the supply chain determines its ability to withstand currency risk.

Upstream vs. Downstream: Import Dependence is the Key Variable

• The Beneficiaries: Large-scale refining and chemical enterprises that rely on imported raw materials. For crude oil processing, when the RMB appreciates, the RMB cost of importing oil directly decreases. According to China Forex reports, the maximum price fluctuation for Brent crude in 2024 reached 30.71% , while the RMB exchange rate can fluctuate up to 2% in a single day, with a maximum range of 4.04% in 2024. This dual volatility creates significant challenges for corporate budget management.

  
  

• The Ones Under Pressure: Pure export-oriented companies that source raw materials domestically and sell products overseas. They cannot benefit from lower import costs and must bear the full brunt of the price pressure on the export side.

This "temperature gradient" means that even among "Made in China" products, the rigidity of USD pricing during an RMB appreciation cycle varies. Industries that can hedge with lower import costs face relatively less upward pressure on their export quotes. For those entirely dependent on domestic resources, the price transmission is more direct and severe.

Part III: Spotlight on Fertilizer - Resources at Home, Pressure from Abroad

Turning the focus to the fertilizer industry, the situation becomes even clearer.

Take phosphate fertilizers as an example. China is largely self-sufficient in phosphate rock. For phosphate fertilizer exporters, they fall squarely into the "pure export-oriented" category described above—

• Raw Material Costs: Phosphate rock purchases are priced in RMB and are completely unaffected by exchange rate fluctuations.

• Processing Costs: Labor, energy, equipment depreciation - all are RMB expenditures.

• Sales Revenue: Products are sold overseas and settled in US dollars.

This means that when the RMB appreciates, fertilizer companies get no natural hedge or cost relief on their expense side, while the exchange loss on their revenue side is very real.

This cost structure dictates that fertilizer export prices are exceptionally sensitive to the RMB exchange rate.

The industry has real-world examples. During a period when the RMB appreciated rapidly from 6.6 to 6.3, a fertilizer trading company executive reported that the currency fluctuation "almost wiped out all our profits, turning profitable deals into loss-making ones. " For bulk commodity trading with inherently thin margins, a few percentage points of exchange rate movement can completely change the profitability of a transaction.

Customs data illustrates the pressure. In November 2025, China's exports of binary compound fertilizer were 66,100 tons, a month-on-month decrease of 32.96% ; exports of ternary compound fertilizer were 79,300 tons, down 19.24% month-on-month. While policy factors primarily drove these volume declines, they also reflect the growing operational pressure on exporters in an appreciating currency environment.

Ammonium chloride trends are also noteworthy: from January to September 2025, cumulative exports reached 1.5236 million tons, a year-on-year increase of 37.60% , hitting a record high. However, the average export price in September was only $75.06 per ton, down 21.37% year-on-year. Many exporters report that amidst fluctuating and declining domestic market prices, overseas clients have adopted a "wait-and-see" attitude.

Part IV: Buyer Strategies - Seizing the Initiative Amidst Appreciation Expectations

Based on this analysis, as the RMB enters a long-term appreciation channel, international fertilizer buyers need to reassess their procurement strategies.

1. Understand Your Supplier's Pricing Logic

When negotiating with Chinese suppliers, understanding their cost structure is crucial. For products like phosphate fertilizers, where resources are domestic and markets are overseas, suppliers face a pure currency risk exposure. This means they will inevitably factor exchange rate expectations into their quotes. If they expect the RMB to continue appreciating, they will be more inclined to raise USD prices to protect their margins.

2. Seize the Value of the "Time Window"

In an environment of expected RMB appreciation, placing orders early is a strategic advantage you can actively leverage.

Why? Because at this moment, the interests of buyers and suppliers are highly aligned-

• For the buyer, ordering early means locking in procurement costs at the current exchange rate, avoiding paying more USD later if the RMB appreciates further.

• For the supplier, an early contract secures the order and revenue. They can immediately use financial instruments like forward settlement with their bank to lock in the current exchange rate for converting future USD revenue into RMB, ensuring their profit isn't eroded by subsequent currency moves.

How effective is forward settlement? A typical example: A refining company anticipates needing to pay $1 million for purchases in two months. It signs a 2-month forward sale contract with its bank, locking in a rate of 6.526. Assume that on the payment date, the spot RMB rate has appreciated to 6.40. The company that did not hedge would have to buy USD at 6.40. But the company that hedged still buys at 6.526, locking in its procurement cost in advance and avoiding the uncertainty of currency fluctuations.

3. Integrate Currency Management into Procurement Decisions

For large, long-term buyers, consider establishing more flexible pricing mechanisms with suppliers. For example:

• Include exchange rate adjustment clauses in long-term agreements, stipulating price renegotiation if the rate fluctuates beyond a certain threshold.

• Explore the possibility of RMB-denominated pricing and settlement, shifting the currency risk to financial institutions better equipped to manage it.

• Assess suppliers' currency risk management capabilities – those who proactively use tools like forwards to lock in costs are often able to offer more stable pricing and reliable supply.

As a case study published by China's State Administration of Foreign Exchange illustrates, an exporter of agricultural products and related chemicals suffered significant losses on some orders in 2020 due to a failure to use hedging tools and the industry's thin margins. With bank guidance, the company began calculating target exchange rates based on business costs and gradually developed a mature hedging strategy, learning to "look past floating gains and losses to lock in profits in advance. " In 2021, it accumulated nearly $200 million in hedging transactions.

Part V: Conclusion

Returning to the threshold mentioned at the beginning: with the RMB exchange rate at 6.9 or higher, international fertilizer buyers face both a cost challenge and an opportunity for strategic adjustment.

Understanding the industrial logic behind the exchange rate-who benefits, who bears the pressure, who has hedging tools, and who must passively accept the situation-enables you to more accurately anticipate price trends and plan your procurement rhythm with greater composure.

In an environment of expected long-term RMB appreciation, one thing is certain: Time is becoming a critical variable affecting procurement costs. Mastering this variable is the key to seizing the initiative.

After all, in the thin-margin world of fertilizer trade, locking in certainty is far more valuable than speculating on unknown gains.