Cash Flow Management Practices and Strategies a Case Study of Selected Chinese Companies Operating In Ethiopia

Abstract

This thesis investigates cash flow management practices and strategies among Chinese companies operating in Ethiopia, with particular focus on the manufacturing, construction, and infrastructure sectors where Chinese investment plays a critical role. The study adopts a descriptive research design and employs a census approach, covering 15 selected Chinese companies that are actively operating in Ethiopia. Data were collected from 45 respondents, comprising financial managers, accountants, and operational staff, using structured questionnaires, interviews, and document review. The findings indicate that Chinese firms in Ethiopia face significant cash flow challenges arising mainly from external factors, including delayed value-added tax refunds and government payments, foreign currency shortages, exchange rate volatility, and infrastructural inefficiencies. Internally, operational inefficiencies, delayed receivables, and supply chain disruptions further intensify liquidity fluctuations. These challenges disrupt operational continuity, increase financing costs, constrain investment capacity, and strain relationships with suppliers and employees, ultimately affecting firm sustainability. Despite these constraints, Chinese companies adopt various coping strategies, such as maintaining liquidity reserves, negotiating flexible payment terms, relying on internal financing, hedging foreign exchange risks, and utilizing technology to enhance cash flow forecasting and control. Effective coordination between headquarters and local management is also found to be essential in adapting corporate financial policies to Ethiopia’s financial and regulatory environment. The study concludes that while Chinese companies benefit from strong financial capacity and operational experience, they must continuously adapt to Ethiopia’s complex financial and regulatory landscape. Accordingly, the study recommends improving cash flow forecasting practices, strengthening stakeholder engagement, diversifying funding sources, optimizing internal operational efficiency, managing foreign exchange risks, and enhancing financial and policy frameworks to support sustainable foreign investment in Ethiopia.