Aug 31, 2022 08:43 PM

In Depth: Why Chinese Companies Hesitate to Hedge Forex Risk

Imagine you are running a Chinese electronics-maker that signed a deal with an American manufacturer on Jan. 4 to buy $10 million worth of microchips for your company’s line of Internet-connected gizmos, with payment due on delivery in U.S. dollars.

Let’s say those chips arrived on Aug. 1. When the deal was done, the purchase was set to cost your company 63.7 million yuan. However, due to the yuan’s depreciation against the dollar this year, the price of that $10 million payment increased to 67.5 million yuan over the first seven months of this year. That’s a 3.8 million yuan ($563,000) loss for doing nothing but running your business as usual.

You've accessed an article available only to subscribers
Share this article
Open WeChat and scan the QR code
Get our CX Daily, weekly Must-Read and China Green Bulletin newsletters delivered free to your inbox, bringing you China's top headlines.

We ‘ve added you to our subscriber list.

Manage subscription
Caixin China Biz Roundup: Jack Ma Resurfaces on the Mainland