3. Would you recommend a dim sum bond issue to McDonalds? On a warm May day in...
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3. Would you recommend a dim sum bond issue to McDonald’s?
On a warm May day in 2010, Marc Monyek, senior director of Asia Pacific Middle East finance for McDonald’s, was sitting in his Oak Brook, Illinois, office when he received a call. Standard Chartered Bank presented him with an intriguing idea:
Would McDonald’s be the first multinational corporate issuer of Chinese renminbi (RMB)–denominated bonds in the fledging yuan market in Hong Kong?12 The Chinese government maintained a tight hold on both China’s capital account and the value of the RMB. Beginning in 2005, Beijing permitted the RMB
to appreciate in a carefully managed fashion. Since July 2005, the RMB had appreciated 20.5 percent against the U.S. dollar (see Case Exhibit 11.1). However, much of this appreciation occurred between July 2005 and June 2008, when the RMB increased in value at an annual rate of about 6 percent. Since then, in response to the global financial crisis, the Chinese government had resumed a fixed peg to the U.S.
dollar at approximately RMB 6.8/US$1. While it was widely expected that China would eventually resume a managed float, there was no indication when precisely this would occur.
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