Exporting to China : How to Manage Payment Risks and Transaction Exposure

This dissertation deals with export from Sweden to China and the management of possible problems associated with payment failure and transaction exposure, related to this. In addition, the study also involves the aspect of political risk in China and the cultural differences that occurs between Sweden and China. The main problem of this dissertation is to investigate how export companies, within the manufacturing industry, secure their outstanding payments and reduce their transaction exposure, when exporting to China. Coupled with this problem, the relation of cost versus risk is considered. The mode of procedure of this dissertation has firstly consisted of information retrieval, in regard of secondary data. Secondly, concerning the gathering of primary data, we have used a qualitative approach and interviewed a number of respondents within each subject-field. Moreover, a company of reference has been used, which gave us a starting-point to set out from in our dissertation. In regard of our conclusions, we have found that it is not possible to recommend neither one single method of payment nor a specific currency-hedging method, which are applicable for the entire manufacturing industry, when export is made to China. The decision of which method of payment and currency-hedging method that is most appropriate is affected by external factors as well as company-specific factors.