Exchange rate fluctuations are the 'invisible killer' of foreign trade enterprises' profits. In 2023, the US dollar index will experience severe fluctuations, and the two-way volatility of the Chinese yuan will intensify. Enterprises need to establish a sound risk hedging mechanism.

Management strategy:

Financial instrument application:

Forward foreign exchange settlement and sale: Lock in future exchange rates, suitable for long-term orders.

Option contract: Pay premium to avoid extreme risks.

Diversification of settlement currencies:

Negotiate with Eurozone clients to price in euros and diversify their dependence on the US dollar.

Pilot RMB Cross border Payment (CIPS) to avoid exchange losses.

Cost dynamic adjustment:

Reserve exchange rate fluctuation space when quoting (such as ± 3% clause).

Shorten payment terms and accelerate capital turnover.

case
A certain textile export enterprise in Jiangsu lost 5% of its profit in 2023 due to the appreciation of the Chinese yuan without hedging, but stabilized its earnings the following year after introducing foreign exchange futures.

Expert advice:
Collaborate with banks to customize foreign exchange plans and regularly review exchange rate trends (paying attention to variables such as Federal Reserve policies and geopolitical conflicts).