NOTES TO THE CONSOLIDATED FINANCIAL  STATEMENTS  (RMB AND US$ AMOUNTS EXPRESSED IN THOUSANDS, EXCEPT PER SHARE DATA)  31.  Financial risk management objectives and policies The Group’s principal financial liabilities comprise loans and borrowings, trade and other payables, and financial  guarantee contracts. The main purpose of these financial liabilities is to finance the Group’s operations and to provide  guarantees to support its operations. The Group has loan, trade and other receivables, and cash and bank deposits  that derive directly from its operations. The Group also holds available-for-sale investment and enters into derivative  transaction. The Group is exposed to market risk, credit risk and liquidity risk. The Group’s senior management oversees the  management of these risks. There has been no change to the Group’s exposure to these financial risks or the manner in  which it manages and measures the risks. Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes  in market prices. Market risk comprise three types of risk: interest rate risk, currency risk and other price risk, such as  equity price risk. Financial instruments affected by market risk include loans and borrowings, deposits, available-for- sale investment and derivative financial instrument. The sensitivity analyses in the following sections relate to the position as at December 31, 2012 and 2013. The sensitivity analyses have been prepared on the basis that the amount of net debt, the ratio of fixed to floating  interest rates of the debt and the proportion of financial instruments in foreign currencies are all constant at December  31, 2013. The analyses exclude the impact of movements in market variables on provisions and on the non-financial assets and  liabilities of foreign operations. Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of  changes in market interest rates. The Group’s exposure to the risk of changes in market interest rates relates primarily  to the Group’s interest-bearing bank deposits and loans and borrowings from banks and financial institutions. The  interest-bearing loans and borrowings of the Group are disclosed in Note 15. As certain rates are based on interbank  offer rates, the Group is exposed to cash flow interest rate risk. This risk is not hedged. Interest-bearing bank deposits  are short to medium-term in nature but given the significant cash and bank balances held by the Group, any variation  in the interest rates may have a material impact on the results of the Group. The fixed deposit pledged with bank of the  Group is disclosed in Note 21. The Group manages its interest rate risk by having a mixture of fixed and variable rates for its deposits and borrowings. The sensitivity analyses below have been determined based on the exposure to interest rates for bank deposits and  interest-bearing financial liabilities at the end of the reporting period and the stipulated change taking place at the  beginning of the year and held constant throughout the reporting period in the case of instruments that have floating  rates. A 50 basis point increase or decrease is used and represents management’s assessment of the possible change in  interest rates. If interest rate had been 50 basis points higher or lower and all other variables were held constant, the profit for the  year ended December 31, 2013 of the Group would increase/decrease by Rmb 6.5 million (US$1.1 million) (2012:  increase/decrease by Rmb 4.7 million). Market risk Interest rate risk Interest rate sensitivity China Yuchai International Limited | Annual Report 2013 116