US Dollar Exchange Rate Fluctuations and Foreign Exchange Risk Exposure: Evidence from Chinese Foreign Trade Enterprises

Grounded in the theory of foreign exchange risk exposure and the capital market approach, this study investigates how fluctuations in the US dollar exchange rate affect stock returns of Chinese foreign trade enterprises. Using panel data from 23 representative firms among the top 100 Chinese foreign trade listed companies, covering the period from 2022 to February 2025, this paper constructs a fixed-effects panel regression model to empirically test the impact of US dollar exchange rate movements on individual stock performance. The results reveal two key findings. First, the selected companies exhibit significant exposure to US dollar risk, whereby an appreciation of the US dollar against the CNY leads to a notable decline in monthly stock returns. Second, the negative effects remain robust across various model specifications and variable settings. These findings underscore the substantial influence of exchange rate volatility on the financial performance of foreign trade companies in China. By identifying the sensitivity of firm-level returns to currency fluctuations, this paper provides valuable insights for corporate risk management and strategic decision-making. It offers practical implications for companies aiming to mitigate exchange rate risks and formulate more resilient international financial strategies in a highly volatile global market environment.