Hedging in China Also Emerging

The hot economies of major developing countries such as China, Brazil and India are all experiencing inflation, and their still developing banking systems and currency restrictions make it difficult to use traditional methods to hedge that risk.

That situation is exacerbated in China by the appreciation of the renminbi, which has ramped up production costs in recent years, along with the country's rising wages. China's government applies currency controls that limit renminbi inflows and outflows, and so inhibit the use of traditional forward contracts that require the delivery of the currency.


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