Study On International Trade Risk's Avoiding Of ZM Wood Industry

Currently, China has been keeping an up-trend in the international trade and established itself as a large global trade partner. However, there are issues with bad debts associated with the trade. According to the official survey, the rate of bad debts in China export amounts to 5%, which is about 10 to 20 times of the rates for the developed countries. In 2004, the amount of bad debts in China export is about 30 billion US dollars based on the total export of 593.36 billion US dollars. The China exporters have been in a more complex international environment and the risk of bad debts has become increasingly prominent since China joined the WTO.In this paper, we apply the Theory of Risk Avoidance to the management of bad debt risks in the international trade. I use both qualitative and quantitative methods to analyze the risks horizontally and vertically, and to categorize the risks into national risk, market risk and fraud risk. The routine business risks of ZM Lumber Export Limited Co. is analyzed in our case study. We propose strategies for risk avoidance based on the knowledge and experience in the international trade. We make recommendations for ZM Lumber Export Limited to implement the strategies, (1) build a Risk Alarm System based the pre-defined rules; (2) perfect the management structure and regulations to lay a foundation for the risk avoidance; (3) strengthen the internal control with execution protocol; (4) provide professional training to employees in both knowledge and skills.