On The Risk Management Of Agricultural Enterprises Under The Trade Disputes Between USA And China

Since 2018,the United States launched the “301 investigation” against China,the trade between China and the United States has launched a fierce confrontation.The United States announced that it will impose tariffs on China's steel and aluminum products.As a counterattack,China also imposes tariffs on US imports,mainly for agriculture.The variability and suddenness of trade disputes have broken the stability of business operations and exacerbated the operational risks that agricultural enterprises routinely exist,such as the soybean business.Due to the high consumption and high import volume of soybeans in China,the soybean industry occupies a very important position in the international soybean production and consumption and trade.The soybean industry has a large trade volume,a long industrial chain and a wide range of influences.The trade dispute between the two countries undoubtedly had a huge impact on China's soybean industry.With the increase of tariffs,the cost of importing US soybeans has increased,and the domestic soybean market has experienced volatility.The agricultural enterprises whose main business is soybeans are also facing operational risks.Due to the transmission mechanism of the soybean industry chain,the fluctuation of raw material soybean prices has gradually affected the downstream soybean oil soybean meal distributors,and a series of follow-up effects need to be paid attention to by enterprises.Based on the trade disputes between USA and China,this paper takes Hainan Jingliang Holdings as an example to analyze the operational risks encountered by soybean processing enterprises and how enterprises deal with business risks.The article mainly draws on the theory of risk management and the theory of hedging.Firstly,it introduces the current situation of soybean trade in China,including the characteristics of soybean trade and the supply and demand of soybean market in China.The demand for soybeans in China has been maintaining a steady upward trend,and domestic production capacity is difficult to meet.Therefore,the supply of soybeans in China has long been dependent on imports.Next,we introduce the business risks that are common in this industry.Secondly,it analyzes the business risks encountered by Jingliang Holding Company in the context of the trade disputes between USA and China.Among them,price risk is the most important risk,including raw material price risk and finished product price risk,many factors leads to raw material price risk,such as the lack of soybean pricing power in the international market,the supply and demand of soybean market,and speculative factors;In the first half of 2018,the renminbi continued to depreciate.Foreign exchange risk is also a major concern of enterprises.It is mainly reflected in foreign exchange trading risks and foreign exchange translation risks.Credit risk is a possibility that enterprises may encounter in the process of handling letter of credit settlement and various receivables and payables.The risk of legal action;the legal litigation risk mainly refers to legal disputes that are easy to be triggered during the trade war,which brings unnecessary economic losses to the enterprise;in addition,there are turnover rate risks,and enterprise production and operation risks.In the face of the impact of Sino-US trade frictions,Jingliang Holdings took timely measures,such as soybean hedging and purchasing foreign exchange forwards,which avoided risks to a certain extent and prevented enterprises from suffering excessive economic losses.The practice of Jingliang Holdings gives us some inspiration,but there are also areas for improvement.At this stage,the trade disputes between USA and China has not yet ended.Although the two sides have temporarily eased their passage,the impact of the market continues,and the prevention and avoidance of risks cannot be stopped.Enterprises need to pay close attention to the direction of trade wars,changes in the industry market,changes in the RMB exchange rate,etc.,and formulate long-term risk management strategies to truly meet the impact and challenges of external complex environmental changes and achieve stable and sustainable development.