Foreign Exchange Risk Management Of Small And Medium-sized Foreign Trade Enterprises

With the advent of the RMB exchange rate risk, China's small and medium-sized foreign trade enterprises are bearing a certain impact. China's financial and foreign trade sectors have begun the foreign exchange risk management practice and exploration, and have accumulated some valuable experience. However, targeted research into small and medium-sized foreign trade enterprises with the current situation as well as their own characteristics is still not sufficient. Therefore, it is important to analyze the foreign exchange risk and its impact faced by China's small and medium-sized foreign trade enterprises, and to identify the corresponding risk management preventive measures.Firstly, the foreign exchange risk is brought by the fluctuating of RMB exchange rate, so the first step is to grasp the exchange rate change's law and trend in the near future and in the long-term. Since the exchange rate reform, the exchange rate of RMB against the US dollar is on the rise continuously . From a long-term perspective, however, various factors affecting the exchange rate have also brought about the uncertainty and complexity changes to the exchange rate. Moreover, enterprises should make clear whether the changes in the RMB exchange rate will have impact. This paper presents a certain perspectives: according to China's specific conditions, the general trade, domestic enterprises, circulation enterprises and low value-added products etc. subject to greater impact of changes in the RMB exchange rate. In addition, price elasticity of demand should also be taken into account. For the goods that has price elastic demand, the enterprises should avoid the use of price increase strategy in the case of appreciation of the RMB.Secondly, in this paper, according to the recognized standards, the foreign exchange risk faced by small and medium-sized foreign trade enterprises will be divided into three categories: transaction exposure, translation exposure and economic exposure. For small and medium-sized foreign trade enterprises, the prevention of transaction exposure should be focused on after the exchange rate reform. But this is not to say that translation exposure and economic exposure are not important. The translation exposure will affect the enterprises'image and external financing lines of credit, while the economic exposure is of more extensive and far-reaching impact.Thirdly, foreign exchange risk management is the core of this paper. In the first, this part discusses different types of risk identification and measurement, then, it proposes the idea of guarding against risks, and sums up various specific measures of risk prevention: for transaction exposure and translation exposure, it should take a balanced position and lock the exchange rate; as to economic exposure, its prevention depends largely on enterprises'decision-making in marketing, production and financial aspects.Finally, the conclusions further pointed out that in the process of guarding against foreign exchange risk, some subjective and objective issues faced by China's small and medium-sized foreign trade enterprises remain to be further studied and resolved. Therefore, this paper also made recommendations that SMEs should base on self-prevention and must actively study and make use of various prevention measures.At the same time, banking, government and other parties concerned should actively support the development of small and medium-sized foreign trade enterprises.In this paper, data analysis and case analysis methods are used. data and case information are from the primary investigation and the relevant literature. The relevant data and the case presented are analyzed by the author. At the same time, the author hopes that this paper can provide a little inspiration of foreign exchange risk awareness and prevention to small and medium-sized foreign trade enterprises.The deficiencies in this paper: the acquisition of practical information is not sufficient, so that it is difficult to use the primary survey data in writing. In addition, some individual perspective raised remains to be tested.