Foreign Investment Risk Factors In China

 Assignment 1: Due Sunday, Sep 30Analyze the following article and provide a report that answers these questions:

Risk of China economic collapse overblown | Emerging Markets | AMEinfo.com. (n.d.). Middle East business & financial news | business directory & current events | AME Info. Retrieved July 22, 2010, from http://www.ameinfo.com/35739.html

1. 1. Based on the findings in the report, analyze three factors MNCs can use to evaluate China’s risk as a potential foreign investment.

1. 1. The Chinese Yuan is not convertible to American dollars. This restricts Chinese investors from exchanging their Yuan for dollars to invest abroad. The rate of exchange is currently 8.28 Yuan to 1 dollar. In this framework, answer the following questions:

1. 1. • What are currency exchange controls?

1. 1. • Why are these controls imposed?

1. 1. • What impact do these controls have on Yuan to dollar exchange rates?

1. Read the section in the article titled Balance of Payments. How can basic hedging techniques be applied to China?

write a report of findings of three pages as a Microsoft Word document, double-spaced, in Arial 12 pt font. Your report should be your own—original and free from plagiarism.

Assignment 2: Bank of China ( due Saturday, Sep 29)

Bank of China has opened trading in the Chinese currency on the international financial markets. Is this good or bad for China? Is this good or bad for the U.S.? What will be the effect on the U.S. dollar and European Euro as reserve currencies?

You can look for additional readings on Internet related to this topic.