A Research On Financial Risk Control Of RMB Exchange Rate Fluctuation

China has transformed from a planned economy to a socialist market economy, The reform processes from shallow to deep. In the financial sector, one of the most difficult reforms is the market-oriented reform of exchange rates. The market-oriented reform of exchange rates not noly relates to RMB’s appreciation or depreciation, it also relates to the establishment of the market mechanism of the exchange rate. At present, the exchange rate is gradually changing from being dominated by the government to being market-oriented. The RMB exchange rate, after several decades of relative stable, begins to fluctuate. In the background of the acceleration of the internationalization of the RMB, the fluctuation of RMB becomes exacerbated and complicated. The RMB exchange rate no longer presents the single trend of appreciation or depreciation, it lack of regularity. The increasing volatility impacts differently to government, corporate, family (personal).Before they come to adapt the change of above reform, frequent and unpredictable fluctuations of exchange rates will lead to financial risks.From the government perspectve, exchange rate fluctuations affect the value of the government’s foreign exchange reserves.In recent years, in the background of the continued appreciation of the RMB against the U.S. dollar, China’s foreign exchange reserves appear to shrink dramatically, not only the government’s balance sheet diminuted in value, the real purchasing power of foreign exchange reserves also reduced. From the corporate perspective, the exchange rate fluctuations may lead to translation risk, trading risk and economic risk. Translation risk will not cause actual losses.Trading risk often causes income reduction or increase in expenditure,which brings to the actual losses to the corporation. Economic risk is the risk that the unexpected fluctuation leads to the change of the company’s future cash flow, and further affect the value of the company. Economic risk bases primarily on economic estimates of experienced personnel, somekind of subjective features. This dissertation mainly analyzes the trading risk, the unexpected fluctuation of the exchange rate leads to losses to the corporation. Many corporations of poor risk management have their revenue eaten by the rate accidents, some even have to bankrupt. For individuals and families, exchange rate fluctuations will also bring some impact to their economic activity, affect their value of the foreign assets or investment incomes.Fluctuations in exchange rates has become an unignored factor to the bodies who take part in the foreign economic activities. So the risk management and control issues should be bring to attention. In the financial risk management activities,the balance sheet plays an important role.Balance sheet statements reflect not only financial information,but also the main economic activities from simple digitals. It can be said that the balance sheet is the most objective reflect of economic activities. So we starts from the BS anlysis and management to control exchange rate risk. From the government’s part, we can analyse the balance sheet of the central bank, study the quantity、structure and duration of exchange reserves. We can use these datas to construct a reference index system to find the flaws.From a corporate perspective, the reconstruction of corporate balance sheet is a viable way to control risk. Financial and management personnel can easily capture the size of the foreign exchange exposure through foreign currency balance sheet,then they can master the exposure through the budget and use financial and non-financial instruments to reduce extrabudgetary exposure.Finally, they can find the cause of the loss, through the comparative analysis of accounts budget,which will provide experience for the future risk management. From the perspective of personal and family, studying the BS sheet and building the index system can help them to find the risk and to measure whether the asset allocation is reasonable. Of course, in order to enhance the effect of the risk management, we also need to optimize other field, like perfect the legal system、 promote the reform of the foreign exchange market and so on.This dissertation is consists of9chapters, which is arranged by the logic of "state the status quo-raise questions、analyze questions、resolve questions".Chapter3to Chapter5is to "state the status quo-raise questions". Chapter3seeks to define the concept of exchange rate fluctuations Group. Chapter4begins to analyze the factors affecting the exchange rate trends, unlike the conventional factors like interest rates、 commodity prices and other factors, we stress on China’s foreign exchange management system、the double surplus、domestic and international economic cycle fluctuations and other factors, these factors are in line with China’s national conditions. On this basis, the dissertation predicts the rates trends by theoretical explanations and index system.The fifth chapter analyzes the impact of exchange rate fluctuations to government、 corporation individual and family, major analyzes the adverse impacts. The unexpected exchange rate fluctuation, rise or fall, may result in losses. Generally speaking, the first part clearly points out what the risk is? How risk generates? The second part is from chapter6to chapter9, which concerns about the risk management.Chapter6to Chapter8respectively expounds the specific measures of risk management of the government, corporation, individual and family, from the perspectives of system construction、 supervision strengthen and else. Each principal has its own characteristics.The chapter9explains the supporting measures needed to be implemented by the government at the macro level, such as changing the mode of economic development to ease the appreciation pressure、developing the domestic financial markets、innovating financial instruments, which will realize the auxiliary supports to risk management.