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China Exporters Urged to Improve Hedging

China’s exporters have been urged by the People’s Bank of China (PBOC) to improve their foreign exchange hedging ability after the central bank released the results of a survey of 323 export enterprises.

According to official news reports, PBOC said that following the revaluation of the yuan in July 2005, export firms have gradually become used to the new system and currency fluctuations but the scale of hedging still remained low.

Trade finance was the most frequently used hedging tool followed by forward foreign exchange, use of non-US currencies for transactions, and changing the timing of trade payments.

However, PBOC said that domestic banks also needed to provide more hedging products including lengthening the forwards market to longer than one year.

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