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Exchange Rate Risk Management at Chinese Small- and Medium-Size Enterprises
University West, School of Business, Economics and IT, Division of Business Administration.
University West, School of Business, Economics and IT, Division of Business Administration.
2018 (English)Independent thesis Advanced level (degree of Master (One Year)), 10 credits / 15 HE creditsStudent thesis
Abstract [en]

The topic of this thesis concerns how Chinese SMEs manage foreign exchange risk. Since the financial reform in 2005, China has adopted the managed floating foreign exchange system and Chinese companies have to face the risk bought by exchange rate. Chinese companies have realized the damage and loss, which is caused by foreign exchange exposure and it, is more essential for Chinese companies to build risk management for identifying, assessing and responding to foreign exchange risk. In general, there are financial hedging tools when companies respond to foreign exchange risk, such as forward hedging, option hedging and so on, and operating hedging tools can be potential options for Chinese SMEs to use. Compared to the large companies, Chinese SMEs have few resource and ability to build their risk management and few channels and tools to deal with foreign exchange risk and diminish the loss. There are researches that have been done on how SMEs deal with foreign exchange and the hedging tools these SMEs use. But only few research relates to Chinese companies and even few research talks about Chinese SMEs and how they conduct risk management and what tools they have. The purpose is to fill in this blank.

This research adopts qualitative research strategy and is based on the interview with owner or financial managers of Chinese SMEs. Authors adopt a qualitative case study to collect empirical evidence and invite five interviewees for data collection. These Interviewees are CEO or financial managers of Chinese SMEs.

Through the research, authors find the appreciation of Chinese Yuan (CNY) is the main threat to Chinese SMEs. Although most of Chinese SMEs have realized the foreign exchange exposure, only part of Chinese SMEs has risk management towards the risk. Most Chinese SMEs use operating hedging tools to deal with transaction exposure and economic exposure. But only part of Chinese SMEs can use financial hedging tools to handle transaction exposure because they have resources and ability to use these tools. In the other hand, forward hedging is chosen by most Chinese SMEs and the banks which have permission from government to offer forward service are the only channel for Chinese SMEs to use forward hedging tool. Lack of knowledge, resources and capability is main challenge for Chinese SMEs in forecasting future exchange rate, building risk management and conducting risk response to foreign exchange exposure.

Place, publisher, year, edition, pages
2018. , p. 40
Keywords [en]
Risk management, Foreign exchange exposure, Hedging, Chinese SMEs
National Category
Business Administration
Identifiers
URN: urn:nbn:se:hv:diva-13018Local ID: EXD951OAI: oai:DiVA.org:hv-13018DiVA, id: diva2:1257127
Subject / course
Business administration
Educational program
International Business
Supervisors
Examiners
Available from: 2018-10-19 Created: 2018-10-19 Last updated: 2018-10-19Bibliographically approved

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CiteExportLink to record
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Citation style
  • apa
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Output format
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