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happened to the value of the investment. Since the yuan increased in value, the investment translated
to dollars increased in value. Now let‟s convert the value of CNY 831.490 million as of December 31,
2008. The dollar amount becomes $121 million (Exhibit 7.11). Now we are seeing significant change,
although it is helpful to the accounting statements.
Exhibit 7.9 Exchange rate: Number of Chinese yuan renminbi per U.S. dollar.
Source: FXHistory © 1997-2008 by OANDA Corporation.
Exhibit 7.10 Small Co. balance sheet, December 31, 2004 (in millions).
Exhibit 7.11 Small Co. balance sheet, December 31, 2008 (in millions).
The negative side is that this same movement increased the cost of the engines that Small Co. was
exporting from China and importing into the United States. Just as the assets rose in value by 21%, the
cost of the engines also rose by this same 21%. If we look at a five-year history in January 2001 at
OANDA.com, we would see the summary shown in Exhibit 7.12.
This table shows the success of the government of China in keeping the exchange rate stable. Of
course, history can be a guide but not a guarantee of future events.