A Comparative Study On Foreign Exchange Management Of Chinese And Korean Enterprises

Since China’s exchange rate system was reformed in July2005, the RMB exchange rate has become more unstable. That brings more exchange rate risk to Chinese enterprises. The foreign exchange risk has further increased because of the growth in Chinese enterprises’scale, the speed of the internationalization process and the incomplete management system of foreign exchange risk. Chinese enterprises must strengthen their foreign exchange risk management system to speed up the marketization process.This thesis presents a comparative analysis of foreign exchange risk management systems in Chinese and Korean enterprises. It presents lessons from the failures and successes of Korean enterprises’management of foreign exchange risk, and gives countermeasures and suggestions to improve the management of foreign exchange in Chinese enterprises.Why have Korean enterprises been chosen for comparison?Firstly, the changing process in Chinese and Korean exchange rate systems are similar. The difficulties the two countries face in implementation of the exchange rate systems also have some similarities. The external dependence of the two countries is quite high and the US dollar is the dominant currency in most trade of the two countries so the US dollar has a big impact on the fluctuations in their exchange rates.Secondly, the exchange rate risk that Korean enterprises have experienced is very similar to what Chinese enterprises are facing.