Foreign Exchange Risk Management Of Foreign Trade Enterprises In China Under New Exchange Rate System

Problems of foreign exchange risk were exposed entirely during the finance crisis in Southeast Asia area in the late 1990s, which alarmed countries in Asia. China government readjusted exchange rate system in July 2005. The foreign exchange risk from the exchange rate of RMB against USD going high continually makes many domestic foreign trade enterprises in difficult situation. It is necessary for China to strengthen management of foreign exchange risk. For the complicated international finance market, it is important and urgent for us to research the foreign exchange risk management of foreign trade enterprises.Foreign exchange risk management is a part of risk management and an important step of international finance management. With international trade developing rapidly and international finance market widening gradually, import and export enterprises in China keep their eyes on foreign exchange risk management increasingly. For some historical factors, the research on exchange rate risk management in China is a late starter. And some foreign trade enterprises despise foreign exchange risk management. Moreover, China is very short of talents of professional risk management. All the weaknesses on risk management need improving.First, the paper is based on previous research on foreign exchange risk management. Second, through the method of qualitative and quantitative analyses, the paper explains principles, procedures and related theories of foreign exchange risk management, analyzes present situation of foreign exchange market, measures foreign exchange risk in foreign trade enterprises, and then measures entire foreign exchange risk of foreign trade enterprises with models based on method of value at risk. At last, through the paper's previous study, the author creates a foreign exchange risk management system to improve foreign exchange rate risk management of foreign trade enterprises in China.