Gremlin Games, Inc., of Los Gatos, California, wants to advance USS4,000,000 to its Chinese manufacturing affiliate, Guangdong Disks, Ltd. Gremlin Games creates, designs, and sells children's compurer games throughout North America. Ihe games themselves are manufactured by Guangdong Disks. Gremlin Games owns a wholly owned finance subsidiary in Singapore, which is used to redirect funds between Asia and North America. The current exchange rate is RMB8.00/S. (RMB is the symbol for Chinese yuan, also called "renminbi.")

Gremlin Games might (1) make an equity investment of \(\$ 4\) million in its Singaporean finance affiliate and then have that finance attiliate lend the equivalent in Chinese yuan to Guangdong Disks at \(8 \%\) per annum, or (2) have its Singaporean finance affiliate deposit \(\$ 4\) million in Standard Chartered Bank in Hong Kong where the fiunds would earn 7.6\%. Standard Chartered Bank would then loan RMB32 million to Guangdong Disks at \(8.00 \%\). Standard Chartered would cover its costs and carn its profit on the \(0.4 \%\) spread. Corporate income taxes are \(30 \%\) in the United States and \(40 \%\) in China. No taxes are levied on finance companies in Singapore if those companies do not conduct Singaporean business.

What should Gremlin Games do?