Research On Foreign Exchange Risk Management Of China International Business-oriented Firms

With the economy globalization, the development of China economy and financial internationalization speed up more rapidly. The reformation of China financial system is accelerating toward to the market-oriented and international-oriented direction. With the reformation of RMB exchange rate formation mechanism, this system was replaced by a floating rates system in which the price of currencies is determined by supply and demand of money. Given the frequent changes of supply and demand influenced by numerous external factors,the new system is responsible for currency fluctuations.These fluctuations expose firms which involved in international business to foreign exchange risk. However, due to various factors, the level of foreign exchange risk management among international business-oriented firms in China are still poor. Therefore, the research of foreign exchange risk management will help enterprises cope with exchange rate fluctuations.The thesis reports on some of the results obtained from in-depth studies about foreign exchange exposure and risk management. The thesis induces the foreign exchange risk management practices among international business-oriented firms,with the situations of China international trade, the conditions of foreign exchange market and present circumstances of financial tools which financial institutions provide to. The thesis focus on how firms, which involved in international business,manage their foreign exchange risk, economic risk management and accounting risk management are also discussed. It also seeks to ascertain the extent to which these firms use foreign exchange risk management techniques. The paper is useful not only to firms involved in international trade,but also to financial institutions interested in providing hedging products to these firms.