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| Businesses Need to Better Manage Foreign Currency Risk |
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China's businesses should try to adapt to the market changes and better manage the foreign currency risks as the country has push forward market-oriented reforms on the exchange rate system, Wu Xiaoling, the deputy governor of the People's Bank of China, said on Friday. "As the movement of foreign exchange rate to a large extent reflects supply-demand changes in the market, the enterprises should not care too much about whether the Yuan is revalued or depreciated", Wu said at a summit forum on Development of Enterprises in the Western Areas and Professional Managers held in Lanzhou, capital of northwest China's Gansu Province. "Instead, they should be clear of the fact that there are inevitably risks hidden in the market and learn to better manage these risks," said Wu. Wu noted that China's economy is facing a lot of uncertainties in the process of transition, and it is hard to say the Yuan will definitely appreciate or depreciate. China announced on July 21 last year to scrap the yuan's peg to the US dollar, while linking it to a basket of currencies, and allow the currency to float within a managed band. The yuan has since gained roughly 3.5 percent, less than some daily movements of the dollar or Euro, as it maintained its snail's pace rise to hit a new high of 7.9897 to the dollar on July 21 this year. Wu said the input in terms of risk management is an integral part of the company's operating cost. She suggested that the businesses could mitigate risks by financial derivative tools. |
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