"Shu" on the exchange rate hedging ledger in Dingxi

This article is adapted from: Dingxi Daily

“The tuber” as Dingxi’s exchange-rate hedging ledger

New Dingxi · Dingxi Daily reporter Zhang Guanjie

In early spring on the Loess Plateau, the outdoors are vast and bleak, but inside the fog-culture production room of the Dingxi Potato Research Institute, there is vibrant life. This is Dingxi’s “cradle” for potatoes—producing more than 1.7 billion seeds of original stock annually, over 2 million tons of seed potatoes, with annual export earnings reaching 6 million US dollars.

“Exporters like our company are accustomed to settling foreign exchange as if we were ‘betting’ on appreciation or depreciation. If our prediction is wrong, the thin export profit is often eroded away by exchange-rate fluctuations.” The person in charge of the Dingxi Potato Research Institute told the reporter.

After fully understanding and grasping enterprises’ needs and concerns regarding exchange-rate hedging, the Dingxi branch of the State Administration of Foreign Exchange, together with the Dingxi branch of Bank of China, went into companies to deliver a policy briefing on the “neutralization of exchange-rate risk.” They also custom-built hedging strategies for each enterprise, including “put options, locking in returns, and mitigating risk.” Ultimately, the company decided to turn a $100,000 payment for exported potato seed potatoes to Egypt into an options transaction.

“This options transaction was truly practical. The bank’s service efficiency was high—we got it done within 3 days. It more directly reduced exchange-losses by 9,400 yuan.” The person in charge recalled with satisfaction the exchange-rate hedging ledger in which the potatoes “went out” to the world. This ledger is not only a snapshot of the enterprise’s exchange-rate risk management, but also carries the glory and confidence of the “Gany” brand as it moves toward the world.

This is a concrete practice to support enterprises in better focusing on their core business, resisting risks, and operating steadily. The Dingxi branch of the State Administration of Foreign Exchange will continue to build a precise and efficient ecosystem of exchange-rate hedging services, so that enterprises with hedging needs can “want to,” “know how to,” “be able to,” and “do it better” when hedging—reliably safeguarding the high-quality development of Dingxi’s foreign-related economy.