Abstract:Floating exchange rate system and the global economic integration exacerbate RMB exchange rate fluctuations, so that the international trade exchange rate risk is highlighted. Some of the Chinese multinational corporations are using foreign currency derivatives to hedge exchange rate exposure. However, the domestic theoretical study on whether the foreign currency derivatives can reduce the exchange rate exposure or not is relatively few, some foreign currency derivative risk events attract industry-wide attention for the effects of its use. This paper, based on a sample of 221 non-financial listed multinational corporations in China between 2007 and 2015, uses the Jorion two factors model, studies the company stock return rate sensitivity to the exchange rate fluctuations, as its exchange rate exposure. This paper analyzes the relationship between the use of foreign currency derivatives and the exchange rate exposure of the multinational corporations through the unbalanced panel data model. The results showe that 11.7% of multinational corporations face significant exchange rate exposure every year in China, foreign currency derivatives can effectively reduce the exchange rate risk of China's multinational corporations.