Analysis And Case Study On Exchange Rate Risk Avoiding In Manufacturing Industry

In July 2005, China's RMB exchange rate reform, which was gained much attention at home and abroad, indicates that the exchange rate system reform and economic growth strategy adjustments are entering a new stage. China has entered the era of genuine floating exchange rate. As a large manufacturing country that is closely related to the world economy, the exchange rate fluctuations will have a direct impact on management strategy of the Manufacturing Enterprise which carried out international business activities. At the same time, because of the relative stability of the RMB exchange rate had been running for a long time in China, a number of manufacturing companies who have import and export business in China have low sensitivity to the floating exchange rate and lack of initiative hedge the risk. Therefore, in the new exchange rate system, how to manage exchange rate risk has become an important issue which domestic manufacturing industry needs to face.In this paper, the evolution of China's exchange rate system and the impact factors of exchange rate were analyzed, and we have a deep understanding of the development and the trend of exchange rate system in the macro level. After analyzing the risk formation of China's manufacturing industry, the main representation of exchange rate risks in the domestic manufacturing industry in the import and export business was sum up, and summarized the shortcomings of exchange rate risks management, got the importance of studying for hedging exchange rate risks in manufacturing industry. According to the performance of the exchange rate risk in manufacturing sector, based on the basic theory, bring forward some methods of exchange rate risk avoiding from four aspects such as using derivatives tool, currency selection, the settlement choosing and trade finance,and also explain the exchange rate risk avoiding tool's working ranges, processes, and costs.In addition, this paper also based the actual case, analyzed the main problem of the leather processing company A faced, which is depreciation of U. S. Dollar to RMB, and described how enterprise to manage exchange rate risks by using various tools with the help of commercial bank and at the same time to reduce costs and achieve maximum profit maximization. The commercial bank also received considerable revenue to achieve "win-win" purposes.