Market-oriented RMB Exchange Rate Mechanism And Chinese Enterprise Exchange Rate Risk Management

Market-oriented exchange rate mechanism is the direction drawing the reform of RMB exchange rate system. Market-oriented exchange rate mechanism will cause great uncertainties of exchange rate, thus bring great enterprise exchange rate risk. Therefore, Chinese enterprise exchange rate risk management is not only necessary but also urgent.The main purpose of this thesis is to investigate the status quo of Chinese enterprise exchange rate risk management and study on the management ideas and strategies. This is meaningful because it enables the Chinese enterprises to take effective actions with the lowest cost so as to well reduce the exchange rate risk or even turn the risk into profits.The thesis is divided into four chapters.Chapterâ… : Take a review of the reform of RMB exchange rate system since the founding of the nation. After making an analyze on the reform of RMB exchange rate mechanism and the RMB exchange rate trend since July, 2005, as well as the development of Chinese economy, it is confirmed that market-oriented exchange rate mechanism is the direction drawing the reform of RMB exchange rate system.Chapterâ…¡: Market-oriented RMB exchange rate will cause exchange rate risk. The necessity and significance of exchange rate risk management are theoretically proved. The openness of Chinese economy also demands the Chinese enterprises to carry out exchange rate risk management urgently as market-oriented exchange rate mechanism will cause frequent fluctuations of the RMB exchange rate. Consequently, the Chinese enterprises will be confronted with remarkable exchange rate risk.Chapterâ…¢: Qualitative and quantitative analyses are used to elaborate the exchange rate risk management in this key chapter. Firstly, an emphasis is made on the necessity of establishing the exchange rate risk management system. Then a summary of the exchange rate forecast theories is made and a general model is offered to the Chinese enterprises to figure out the enterprise exchange rate risk. Finally an introduction and appraisal to the commonly used exchange rate risk management methods is provided. The theoretical and empirical knowledge will help the Chinese enterprises to do cost-income calculation and make management decisions.Chapterâ…£: The innovation of the thesis is the empirical study on the status quo of Chinese enterprise exchange rate risk management. Four representative listed company cases are selected to carry out an empirical study on the Chinese enterprise exchange rate risk. The Chinese enterprise exchange rate risk is generally at a high level, which means that the fluctuation of RMB exchange rate will influence most Chinese enterprises greatly. The necessity for the Chinese enterprises to carry out exchange rate risk management is outstanding. Meanwhile, there are still some problems lying on the Chinese enterprise exchange rate risk management. At the end of the thesis, some suggestions are proposed to the Chinese enterprises, the financial institutions and the government as well, so that the Chinese enterprises will be fully prepared for the greater and greater exchange rate risk in the near future.