Does the Currency Exposure Matter in the Chinese Automobile Industry?

Abstract

This study examines the symmetric and asymmetric exchange rate exposures of Chinese automobile firms at different time horizons. Empirical findings reveal that firm returns are less likely to be affected by currency movements at short-term (daily) horizons due to restrictions on the currency daily trading band, but (a)symmetric exchange rate exposures appear to be significant at relatively longer horizons after the launch of RMB internationalisation, particularly for monthly horizons. The evidence also show that returns of ordinary auto firms underperform those of Fortune 500 and B-share auto firms in response to exchange rate changes. As for hedging strategies, firms may consider listing shares on foreign stock exchange in addition to the domestic market and produce products simultaneously in foreign nations through international expansion.