University Project: Country and Business Analysis of China and Tencent

This project provides a comprehensive country and business analysis of China and the Chinese company Tencent. It begins with overviews of both the country and the company, followed by an in-depth political risk analysis, considering factors like government intervention and nationalist behavior. The project then delves into financial risk analysis, including the impact of the 2007-2009 financial crisis, currency exposure, and foreign taxation. A detailed examination of Yuan exchange rate fluctuations is presented, including its dual exchange rate system and the gradual increase in its value. The project also analyzes exchange rate movements of the Euro and assesses the currency exposure of Tencent Holdings Limited, highlighting the company's lack of hedging measures and the resulting losses from foreign exchange rate fluctuations. Finally, the project references relevant sources to support its analysis.

COUNTRY AND BUSINESS ANALYSIS OF
CHINA AND CHINESE COMPANY TENCENT
Name of the University:
Name of the Student:
Authors Note:

AGENDA
• Country and Company Overview
• Political risk analysis
• Financial risk analysis
• Fluctuations in exchange rate
• Foreign exchange rate fluctuations impact on Tencent

TENCENT COMPANY OVERVIEW
• Positioned as an investment holding organization
• Offers value added services along with online advertising services within
Mainland China, North America, Hong Kong, Europe and other Asian
nations

CHINA COUNTRY OVERVIEW
• Business industry of China is observed to be 72.8% of China’s gross
domestic product (GDP) in the current year.
• Currency: Yuan
• Business industry of China including manufacturing, construction and
mining contributed to 48.6% of GDP in the year 2017.
• Manufacturing industrial sectors contributed to 40% of the country’s GDP.

POLITICAL RISK ANALYSIS
• Confiscation, expropriation, currency inconvertibility along with contract
repudiation also serves as major political risks for the nation
• Constant battle between the central government of the organization and
the local and privational governments over the applicable laws.
• Government intervention encompassing the intervention by the target
nation along with intervention by the third nation
• Nationalist behavior also serves as another factor contributing to political
risk for China

FINANCIAL RISK ANALYSIS
• Financial Crisis of 2007-2009 increasing sovereign debt crisis market
pressure
• Currency exposure risk
• Asset Valuation risk
• Foreign taxation risk

EXCHANGE RATE FLUCTUATIONS: YUAN

EXCHANGE RATE FLUCTUATIONS: YUAN
• In opposition to US currency rate, China maintained a dual exchange rate
system
• Yuan currency trade is higher with being in the free-floating market
• Balance of payment greatly relied on administrative methods and the
expense in Yuan currency was determined by income and along with that
imports were determined by exports
• The value of Yuan was also gradually increased to 6.75 RMB/USD after the
Chinese economic reform and the cost of stability bought the RMB to be
overhauled

EXCHANGE RATE MOVEMENTS OF EURO OVER FIVE YEARS

EXCHANGE RATE MOVEMENTS OF EURO OVER FIVE YEARS
• Short-term interest rates- The comparable rates in the Euro zone are
2% speculation. No evidence of inflation and the rates are expected to
remain the same for a longer timeframe
• Trade deficit- The trade deficit in US has amounted to $50.9 billion,
which has been minimized with the passage of time

CURRENCY EXPOSURE OF TENCENT HOLDINGS LIMITED
• this Chinese organization has also not used any hedge measure to
exposure to foreign exchange risks because of which Tencent Company is
observed to experience loss because of the foreign exchange rate
fluctuations
• Tencent Company has experienced loss because of drastic fluctuations in
the foreign exchange rate in connection with its investments and deposits
• Tencent Company has also filed an initial public offering in New York
despite having no license for operating a substantial part of its major
business

REFERENCES
• Chinese Yuan. (2018). Retrieved from
https://www.marketwatch.com/investing/currency/usdcny/charts
• Exchange Rates Graph (US Dollar, Euro) - X-Rates. (2018). Retrieved from
https://www.x-rates.com/graph/?from=USD&to=EUR&amount=1
• Tencent.com (2018). Retrieved from
https://www.tencent.com/en-us/articles/17000391523362601.pdf
• Tradingeconomics.com. (2018). Euro Dollar Exchange Rate - EUR/USD | 2018 |
Data | Chart | Calendar. Retrieved 20 November 2018, from
https://tradingeconomics.com/euro-area/currency
• US Dollar (USD) to Chinese Yuan (CNY) exchange rate history. (2018). Retrieved
from https://www.exchangerates.org.uk/USD-CNY-exchange-rate-history.html
• US Dollar to Chinese Yuan Exchange Rate (Market Daily, CNY to 1 USD). (2018).
Retrieved from https://ycharts.com/indicators/chinese_yuan_exchange_rate