This excerpt taken from the SOHU 10-Q filed Aug 8, 2005.
We may suffer currency exchange risks if the Renminbi fluctuates relative to the U.S. Dollar.
Our reporting currency is the U.S. Dollar. However, substantially all of revenues are denominated in Renminbi. In July 2005, China reformed its exchange rate regime by establishing a managed floating exchange rate regime based on market supply and demand with reference to a basket of currencies. The Renminbi is no longer pegged to the U.S. Dollar, and the exchange rate will be subject to a certain degree of fluctuation. As a result of the floating exchange rate regime, if the Renminbi fluctuates relative to the U.S. Dollar, our revenues as expressed in our financial statements will also fluctuate in value since our reporting currency is the U.S. Dollar. In addition, there are very limited hedging transactions available in China to reduce our exposure to exchange rate fluctuations. While we may decide to enter into hedging transactions in the future, the availability and effectiveness of these hedges may be limited and we may not be able to successfully hedge our exposure, if at all. In addition, our currency exchange gains or losses may be magnified by PRC exchange control regulations that restrict our ability to convert Renminbi into U.S. Dollars.