Currency Effects on the Performance of Chinese Foreign Investments: 1994-2008

Based on the historic market indices for 15 major foreign stock markets for the period from 1994 to 2008, this paper explores the effects of exchange rate changes on the performance of Chinese foreign investments by comparisons between the annual returns and standard deviations in local currencies and in Chinese RMB. The findings indicate that the overall exchange rate effects were negative over the sample period, suggesting the urgent need to hedge the exchange risk.