Management of the Foreign Exchange Rate Risk in a Chinese Company

Xuexin Chen

Master's thesis

Abstract:

Encouraged by the needs of enterprises' transformation and upgrade and the “going out” policy of the country, more and more Chinese enterprises are entering the global markets, however, whether it is an overseas acquisition or the capital operation, enterprises are facing with the foreign exchange risk. They have to start with the management of the foreign exchange risk, the significant influence of government and domestic rules also must be taken into consideration. The aim of this thesis is to analyze and manage the foreign exchange exposure of the chosen company in China (HUAWEI), to do this, it is necessary to research the foreign exchange rate, foreign exchange system and foreign exchange risk, and analyze the impact of foreign exchange risk on Chinese enterprises combining with China’s exchange rate system. And through case study, it will be shown that how to manage the exposure of foreign exchange, so that Chinese enterprises can make better financial managements with foreign exchange risk. The first chapter is introduction, the aim of this thesis and contents of each chapter will be explained in it. The second chapter is the theoretical part, including definition and development of exchange rate, types of exchange rate system, foreign exchange risk and how to manage it. China’s exchange rate system will be introduced in the third chapter, showing how it changes and reforms in different periods, and what characteristics it has. The fourth chapter is application part of foreign exchange rate risk and its management in Chinese company, in this chapter, we will briefly introduce the company, such as its history, corporate affairs, and achievements. Then we will use this company as our case object to analyze its foreign exchange exposure and its management. In the last part of this chapter, some methods and suggestions will be put forward about how to manage the foreign transaction exposure for this company. Finally, we will make a conclusion in the fifth chapter.

Abstract:

Encouraged by the needs of enterprises' transformation and upgrade and the “going out” policy of the country, more and more Chinese enterprises are entering the global markets, however, whether it is an overseas acquisition or the capital operation, enterprises are facing with the foreign exchange risk. They have to start with the management of the foreign exchange risk, the significant influence of government and domestic rules also must be taken into consideration. The aim of this thesis is to analyze and manage the foreign exchange exposure of the chosen company in China (HUAWEI), to do this, it is necessary to research the foreign exchange rate, foreign exchange system and foreign exchange risk, and analyze the impact of foreign exchange risk on Chinese enterprises combining with China’s exchange rate system. And through case study, it will be shown that how to manage the exposure of foreign exchange, so that Chinese enterprises can make better financial managements with foreign exchange risk. The first chapter is introduction, the aim of this thesis and contents of each chapter will be explained in it. The second chapter is the theoretical part, including definition and development of exchange rate, types of exchange rate system, foreign exchange risk and how to manage it. China’s exchange rate system will be introduced in the third chapter, showing how it changes and reforms in different periods, and what characteristics it has. The fourth chapter is application part of foreign exchange rate risk and its management in Chinese company, in this chapter, we will briefly introduce the company, such as its history, corporate affairs, and achievements. Then we will use this company as our case object to analyze its foreign exchange exposure and its management. In the last part of this chapter, some methods and suggestions will be put forward about how to manage the foreign transaction exposure for this company. Finally, we will make a conclusion in the fifth chapter.

Keywords

Foreign exchange rate, exchange rate system, foreign exchange risk, management of foreign exchange risk, Huawei company, forward exchange rate, external hedging, internal hedging, transaction exposure...

Keywords

Foreign exchange rate, exchange rate system, foreign exchange risk, management of foreign exchange risk, Huawei company, forward exchange rate, external hedging, internal hedging, transaction exposure...

Language used: English

Date on which the thesis was submitted / produced: 27. 4. 2018

Thesis defence

• Date of defence: 28. 5. 2018
• Supervisor: Karel Hlaváček
• Reader: Josef Novotný

VŠB - Technical University of Ostrava

Ekonomická fakulta

Master programme / field:
Hospodářská politika a správa / Finance