9/6/2014 Property of International Business Association

IBA

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Monday, September 28th

005 Business Building

International Business Association | General Meeting #3

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International Business Association | Agenda

Icebreaker & Happy Quarters

Market & Club Updates

Study Abroad / International Internships Presentation

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4. Case Study: China’s Yuan-“Our Currency, Your Problem?” Wrap-Up 5.

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IBAChina’s Yuan | Case Study Framework

Situation

Alternatives

Recommendation

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IBAStudy Abroad| Smeal Study Abroad Adviser

•Welcome Maureen Desorcie•Q & A

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•Bill Gross co-founded Pimco in 1971•Actively managed bond portfolios

•Over four decades, Pimco became a giant with $2 Trillion in assets under management•Gross was CIO of Pimco and also personally managed the $222 billion Pimco Total Return Bond Fund•Posted mediocre performance this year• Investors pulled out around $25 billion this year and $68 billion over last 16 months

•Growing concern about his management style• Increasingly erratic behavior• Investor letter was largely an elegy to his cat

•Left to Janus Capital Group to manage a new fund before he could be fired•Do you think a co-founder deserves to be vulnerable to being ousted from the company he helped create?

Market Updates| Bill Gross

9/6/2014 Property of International Business Association

IBAMarket Updates| Bill Gross

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•Students in Honk Kong are demanding full democracy on Hong Kong•Controlled by China but has its own laws•There were hopes that Being would allow residents to choose top elected official through popular vote•Beijing said only candidates it approves can run

•Despite economic progress, students feel growing frustration due to soaring housing costs and an economy dominated by several large conglomerates•Majority of residents, many of whom are older, don’t agree with protests•Had the chance to benefit from China’s economic rise more•Factory owners and real estate investors

•Even though they are statistically a minority, should the younger generations be given consideration despite economic effects?

Market Updates| Bill Gross

9/6/2014 Property of International Business Association

IBAChina’s Yuan | Situation

•How does China control its currency?•What is the evidence that the currency is undervalued?•How does China’s currency policy affect its people and economy?•How does it affect its trading partners?•How does China defend its policies?

9/6/2014 Property of International Business Association

IBAChina’s Yuan | Situation• How does China control its currency?

- Buy $1.3T in US treasuries instead of holding USD• What is the evidence that the currency is undervalued?

- High annual growth, but currency flatlined during growth (exhibit one)- FDI inflow exceeds outflow- China’s trade surplus with the US- PBOC holds trillions of USD in treasuries

• How does China’s currency policy affect its people and economy? (Pros vs. Cons)- Pros

‣Cheap exports, so there is a high demand for Chinese goods‣Jobs‣Economic stability

- Cons‣Losing rural workforce due to low wages‣Less international purchasing power‣$1.3T invested in US treasuries…low returns!

• How does it affect its trading partners?- US/Europe: Trade deficits, manufacturing bankruptcies, cheap financing of deficits, loss of jobs- Asian Nations: Cheap trade with China

• How does China defend its policies?- Our growth has nothing to do with the Yuan…it’s all about our cheap labor & efficiency- We have trade deficits with other nations…this is a US/European problem- You need our lending- US is getting cheap goods - We’re a sovereign nation

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IBAChina’s Yuan | Alternatives•What could China do? What are the implications for China and its trading partners?

9/6/2014 Property of International Business Association

IBAChina’s Yuan | Alternatives•What could China do? What are the implications for China and its trading partners?-Slow appreciation (managed float) over some time frame-Free float system…huge appreciation of Yuan because investors would buy the Yuan due to China’s strong economic growth

-China’s government could allow Chinese-based companies to invest abroad, which would reduce the reserve of foreign currencies

-Tex exports to make them more expensive-Do nothing and keep everything at the status quo

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IBAChina’s Yuan | Recommendation

•What should China do?•Why?•How?•When?

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IBAChina’s Yuan | Wrap-Up

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IBAFundraiser | Possible Dates

•Possible Dates:-October 2nd -October 9th

-October 23rd

9/6/2014 Property of International Business Association

IBASocial Events | International Dinner

•Come join us for a night of eating international cuisines, drinking juice and sharing international experiences on Thursday, October 16th!

•This is a great way to meet your fellow IBA members and the IBA executive board!

•Please sign up after the meeting to contribute to this dinner! (ex: dishes, forks, knives, juice, water, etc)

9/6/2014 Property of International Business Association

IBA

• Fundraiser 1: Donut Sales- Upcoming Thursday night

‣Sign up sheet will be available at the end of the meeting

Fundraiser| Donut Sale

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• $5 dollar entry fee• Rules (taken from PSIA)

- Each contestant is given $1 million to invest- None of your holdings can be over 20% of your portfolio- All stocks bought must be worth more than $1

• Sign-in information will be sent out shortly• See me after to sign up!

Fundraiser| Stock Competition

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• $20 for the semester, $35 for the year• You must pay dues to be considered a member and to apply for an IBA position• See me after the meeting

Updates | Dues

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International Business Association | Wrap-Up

Final Notes - Start thinking about running for Exec Board positions * Must pay dues to be considered - Drop off Fundraising Chair & Club Liaison Chair applications - Ed Jenkins will likely be our new club adviser - Still working with Apple to get a speaker

Next Meeting - Monday, 10/6 at 6 PM in 005 Business Building - What is consulting? - Case Study #2 - Picking a Kiva Enterprise Connect With Us - Email:

International.business.pennstate@gmail.com - Website:

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