Exchange rates will affect Baidu since its revenues and costs are denominated in RMB while its financial assets are predominantly given in dollars. Baidu's dividends and other dollar fees paid to its ADS (American Depository Share) holders depend upon the revenue generated by its Chinese subsidiaries and affiliates in RMB. Significant revaluations of the RMB would affect Baidu's cash flows, revenues, financial positions, earnings, and the value dividends payable on its ADSs in US dollars.
Value increases in the RMB relative to the dollar make investments or expenses denominated in RMB more costly for Baidu, since the company generates its financial capital in US dollar denominations. Value increases in the RMB relative to the dollar will also improve Baidu's revenue numbers as reported in dollars, will improve Baidu's ability to pay dollar denominated dividends from revenue and will improve Baidu's ability to finance expansions from RMB revenues. Additionally, all of Baidu's liabilities denominated in dollars will bi minimized by an appreciating RMB.
Suggestion by Dseg10 on 2008-01-19 00:34:44
Baidu is a great company with a tremendous jump on the all important Chinese market - all of which is explained in full in this article. I got to say though, while Baidu deserves their success and worldwide acclaim as the traffic kings of Chinese search, they have also benefited from a number of dubious advantages mainly centered around governmental assistance and free MP3 downloads. I strongly believe that if you were to strip out the traffic generated by people looking to download free MP3s, Baidu's share of the market would drop dramatically. My two cents.
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