In foreign trade, it usually takes some time for importers and exporters to sign sales contracts and settle the payment. Under the floating exchange rate system, if the exchange rate of the pricing settlement currency rises, the importer will bear the foreign exchange risk; If the exchange rate falls, exporters will bear foreign exchange risks. For example, the euro, the financial crisis triggered by the US subprime mortgage crisis, led to the rapid depreciation of the euro, which brought a fatal blow to China's export enterprises. Foreign exchange risk refers to exchange rate risk and interest rate risk. Exchange rate risk includes credit risk, accounting risk and country risk.
The settlement methods in China's international trade include remittance, collection (D/P, D/A) and letter of credit (L/C). The sight letter of credit in the letter of credit is most in line with the principle of safe and timely receipt of foreign exchange, and the foreign exchange risk is the least. D/A is the worst in terms of security and timeliness. D/P (D/P) will also face the loss of the importer's overdue payment, and the exporter's goods and money will all be lost. Therefore, security and timeliness are the most important considerations in settlement. Enterprises should be flexible and cautious in choosing the appropriate settlement method when they know the credit status of the other party. Although the collection of usance letters of credit is safe and secure, it is not timely, and enterprises can only discount bills, so the probability of exchange rate fluctuation is of course high.
Collection belongs to commercial credit, whether the payment can be received depends entirely on the importer's credit, and the security of collection is poor.