Internationalization of the Renminbi and its impact on U.S. companies' business in China
Garza, Paul A.
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China has made recent dramatic changes in its currency policy by transforming the Renminbi into a global currency. This may force the U.S. companies to reassess their profit-maximizing strategies and the way they conduct business in China. Hence, the internationalization of the Renminbi cannot be ignored. The main goal of this Senior Individualized Project (SIP) is to look into China's process of internationalizing the RMB and how this phenomenon is currently affecting U.S. companies' business. The first SIP research question in the Literature Review is: To what extent does China's internationalization of the RMB impact U.S. companies' business in China? The Literature Review focuses on China's transition to a new currency policy and reveals how U.S. companies can gain from the RMB internationalization. In an attempt to go beyond the first question, a second question was developed in the Analytical Section: If favorable outcomes exist, then what is the strategic plan for U.S. companies that want to gain from the RMB internationalization? This question will be examined through a theoretical model of a U.S. company that follows the decisions and behaviors of profiting companies that have gained from RMB internationalization. Since July 2009, the Chinese authorities started internationalizing its currency by taking two major steps: the establishment of the Pilot Program of the Cross-Border Yuan Trade Settlement and the offshore RMB market in Hong Kong. This SIP needs to be written now because the changes in China's currency policy are not only creating financial opportunities, but also financial risks to U.S. companies. Thus, the goal of this SIP is to urge these companies to prepare new financial strategies if they aim to succeed in China.