2019 Annual Report (^87)
Foreign Exchange Risk
Our presentation currency is CNY, but we have foreign currency exposure related to buying, selling, and financing
in currencies other than CNY. According to our established foreign exchange risk management policy, material
foreign exchange exposures are hedged based on a comprehensive analysis of market liquidity and hedging costs.
We have developed a complete set of foreign exchange management policies, processes, and instructions. These
include:
■ Natural hedging: We structure our operations to match currencies between procurement and sales transactions,
to the greatest extent possible.
■ Financial hedging: For certain currencies where natural hedging does not fully offset the foreign currency
position, we hedge through forward foreign exchange transactions.
In countries where local currencies depreciate sharply or that have strict foreign exchange controls, we manage
foreign exchange exposure using different measures, including exchange rate protection and financial hedging.
We have also adopted solutions like accelerating customer payment and promptly transferring cash out of these
countries to minimize risks.
With other conditions remaining unchanged, exchange rate fluctuations will impact our net profit as follows:
(CNY Million) 2019 2018
USD depreciates by 5% 2,427 (1,776)
EUR depreciates by 5% 117 177
Interest Rate Risk
Interest rate risks mainly arise from Huawei’s long-term borrowings and long-term receivables. By analyzing
interest rate exposure, the company uses a combination of fixed-rate and floating-rate financing tools to mitigate
these interest rate risks.
- Major interest-bearing long-term financial instruments held by the company as at December 31, 2019
2019 2018
Effective
Interest Rate
(%) (CNY million)Effective
Interest Rate
(%) (CNY million)
Fixed-rate long-term financial instruments:
Long-term borrowings 3.99 37,338 4.07 30,762
Trade and other receivables 5.32 (1,692) 5.87 (2,316)
Floating-rate long-term financial instruments:
Long-term borrowings 3.82 67,193 3.82 35,408
Trade and other receivables 0.67 (1,259) 0.83 (1,737)
Total 101,580 62,117