Financial Institutions Should Develop More Exchange Rate Hedging Instruments

Fu Ziying, Vice Minister of Commerce, on a forum in Beijing on Saturday revealed that the appreciation of the renminbi has indeed had a greater impact on exports. Because the financial institutions provide little exchange rate hedging tools and the space for enterprises to digest the exchange rate is getting smaller and smaller, he suggested that the government should continue to coordinate and promote relevant financial institutions to develop more exchange rate hedging instruments.

Reducing losses caused by exchange rate fluctuations

Fu Ziying pointed out that the appreciation of the renminbi has a greater impact on exports.

More than 90% of China's export trade is settled in US dollars, and the appreciation of RMB against the US dollar accelerates, directly increasing the exchange loss of export enterprises and eroding the profits of enterprises.

At the same time, financial institutions provide few exchange rate hedging tools, and many export enterprises, especially small and medium-sized enterprises, are not good at using financial means to avoid risks.

Fu Ziying believes that the government should continue to coordinate and promote relevant financial institutions, develop more exchange rate hedging tools, help enterprises reduce losses caused by exchange rate fluctuations, and continue to provide necessary credit support to export enterprises with market, orders and efficiency.

Seize opportunities and expand foreign investment

"RMB appreciation will increase the cost of enterprises, but it will also help our enterprises to go out to carry out international operations."

The official said that enterprises in Germany and Japan historically have made use of their currency appreciation and actively expanded the scale of foreign investment, which had been developed from pure export to export and overseas production, and gained a lot of profits.

Fu Ziying said: "at present, our country is in the period of adjustment and upgrading of comparative advantage. If the import and export enterprises can establish a global marketing network through overseas mergers and acquisitions and overseas production in this process, we can pform the challenges from simple import and export enterprises to multinational companies, and turn them into opportunities and achieve qualitative upgrading."

He also believes that the subprime crisis has led to some foreign well-known enterprises in trouble. These enterprises have well-known brands and strong international marketing network, and have strong R & D capability. If our enterprises can successfully merge, they will greatly promote the competitiveness of Chinese enterprises.