Foreign Exchange Risk Management in International Enterprises: A Comparative Study of the U.S. and China

The rapid increase in interest rates by the Federal Reserve in recent years has compelled many countries to follow suit, resulting in significant fluctuations in global exchange rates. This volatility poses serious challenges for international enterprises. This study compares foreign exchange risk management practices in China and the United States, focusing on three key dimensions: foreign exchange exposure, risk management strategies, and hedging effectiveness. Our sample comprises 84 of the largest companies by market capitalisation in both countries. We employ descriptive statistics and regression models to analyse currency risks and assess hedging efficiency. The findings reveal that Chinese enterprises generally face greater foreign exchange exposure than their American counterparts. While the USD offers some protection due to its global trade currency status, U.S. firms typically adopt a more aggressive hedging approach using forward contracts and options. Conversely, Chinese firms tend to prefer currency swaps and employ more cautious strategies, often constrained by strict government controls. Furthermore, our analysis demonstrates that Chinese companies exhibit higher hedging effectiveness compared to U.S. companies, where over- and under-hedging are prevalent. Practical implications for multinational corporations and policymakers are discussed.