Construction Of Chinese Enterprises In Foreign Exchange Risk Management System

With the increasing globalization of the present world, all countries are actively playing important roles in the global economic arena. The soaring increase of international trade and international investment brought by this trend leads inevitably to the birth and growth of international financial market which is featured by the frequent fluctuations of foreign exchange rate.Thanks to the policy of reform and opening-up, China has begun to play a more important role in the world economy. However, with the entrance to WTO and the reform of foreign exchange rate system, Chinese companies have to face up to the challenge of frequent fluctuations of foreign exchange rate. Foreign exchange risk bears great significance in the operation of a company.This paper focuses on the management of foreign exchange risk of Chinese companies and those operating internationally in particular. It begins with the review of the related theories concerning international trade, foreign exchange rate determination, risk management and so forth. In the third part of this thesis, the author introduces the definitions of foreign exchange risk and foreign exchange exposure, and summarizes on procedures and steps in the foreign exchange risk management. Chinese companies should be fully aware of the necessity of foreign exchange risk management and should build up an efficient foreign exchange risk management system, in order to be more competent in avoiding risk and reducing costs.The author puts forward an unprecedented"chessboard system"to illustrate the framework of foreign exchange risk management system, and elaborates its three subsystems and nine situations. In the end, the paper demonstrates Chinese companies'practice and problems in foreign exchange risk management through a case analysis, attempting to provide effective solutions.