Ever since mid-June of last year, the Chinese Stock Market has been constantly oscillating. When the Chinese Government decided to devaluate its Yuan, some economists feared that it will have a significant effect on the global economy and the interest rates of financial institutions. A report from The Washington Post said that China’s surprising move is a counter-measure in saving its economy. Ordinary Chinese citizens have also made the buzz on Chinese social media regarding this matter. But when did it all started?
Tracing the Devaluation of Yuan
On August 11 of last year, the Chinese Central Bank devalued its currency by a record 1.9 percent against a basket of currencies, which is assumed to be dominated by the United State’s dollar. This “measure” is followed by a drop of 1.6 percent and 1.1 percent in just two days.
Based on the article of First Post Business, the devaluation of the Yuan currency resulted to at least an $800 billion-loss of investments in the country as foreign investors and Chinese businessmen are tying their money to other countries.
Effects of the Slides in Yuan
It is said that the Chinese outbound tourism will be the first affected by this drop in Yuan. This means that more Chinese yuans (CNY) will be spent against the US dollars, yens or euros. The bottom line: tourists will have to cough out more money due to high Yuan to US dollar or yen or euro conversions. That being said, Attract China refuted that the recent drop of Yuan only had a slight effect on outbound tourism. In fact, 90 percent of international flights and tours have been booked for China’s Golden Week as of the article’s publishing.
In terms of inbound tourism, the Yuan slide is good news to foreign visitors. Almost everything will become way cheaper. For instance, the standard rate to an overnight stay at a Chinese hotel is 600 CNY. Prior to the devaluation, let’s say that the conversion rate of CNY to USD (hypothetical) is 6 CNY against USD. Therefore, a tourist will pay 100 USD for his/her hotel stay. But after the devaluation, CNY was set at a 6.8 per US dollar-basis (hypothetical). In effect, tourists will only have to pay around 88-89 USD for their hotel accommodation.