Final answer:
The impact of an increase in the Chinese yuan against the U.S. dollar on U.S. firms like Apple and Yum Brands operating in China is mixed: it benefits repatriation of profits but may hurt competitiveness and sales volume in China.
Step-by-step explanation:
Whether an increase in yuan in exchange for the dollar is good or bad news for U.S. companies with operations in China, such as Apple and Yum Brands, ultimately depends on various economic factors. A stronger yuan means that when these companies convert their earnings from yuan to dollars, they will receive more dollars for each unit of yuan. This is good for repatriating profits back to the United States. However, it could also mean that their products and services become more expensive for Chinese consumers, potentially reducing sales volume in China.
Firms that operate on international markets often have costs in the local currency but earn revenues in a different currency. For U.S. firms in China, this means costs are often in yuan while revenues may be in dollars. If the yuan strengthens against the dollar, these firms may find their products less competitive compared to local offerings, because a stronger yuan makes U.S. goods more expensive in China. In conclusion, the effects of currency fluctuations are complex and can both help and hinder international businesses.