The appreciation of the Renminbi generally means an increase in its purchasing power. What impact does this have on the lives of ordinary citizens?
The most direct impact is that exchanging for US dollars and other foreign currencies has become more cost-effective.
To put it simply, at the end of March last year, exchanging for 10,000 US dollars required 68,800 Renminbi (exchange rate 6.88). However, at the end of March this year, exchanging for 10,000 US dollars only requires 62,800 Renminbi, saving 6,000 Renminbi.
As a result, those who shop overseas will feel their wallets are "fuller". This is because the equivalent Renminbi can buy more when purchasing goods priced in US dollars abroad. For instance, when buying imported cosmetics, watches, handbags, and milk powder, the quantity remains the same, but the actual money spent is less.
A woman engaged in purchasing Japanese cosmetics told reporters that a skincare product from a high-end Japanese brand, when converted to Renminbi, was about 2,000 Renminbi a year ago, but now it costs only around 1,900 Renminbi. Due to the lower price, more people are buying it.
After the appreciation of the Renminbi, the cost-effectiveness of traveling abroad will also improve.
According to Ctrip, based on the Renminbi exchange rate fluctuations against various currencies as of January 31, 2018, the Renminbi appreciated by 12.5%, 11.4%, and 9.6% against the Philippine peso, Sri Lankan rupee, and Hong Kong dollar, ranking in the top three, while the Renminbi appreciated by about 9% against the US dollar, ranking fifth.
The Philippines, Sri Lanka, Hong Kong, Vietnam, the United States, Japan, Macau, Canada, Russia, and Taiwan have become the "top ten destinations for currency tourism" for outbound travel.
For those studying in the United States, the appreciation of the Renminbi means a reduction in study costs. First, the amount of the study deposit has decreased, lowering the threshold; second, tuition and living expenses abroad have also become cheaper.
For those engaged in import businesses, the cheaper raw materials purchased from overseas is a good thing. However, "some are happy while others are sad"; the prices of goods exported from China to foreign countries have relatively increased, which may reduce competitiveness, and those in the export business may face pressure from shrinking profits.
It seems that changes in the exchange rate will affect the lives of ordinary citizens in various aspects such as studying abroad, traveling, and shopping. So, what are the reasons for the continuous appreciation of the Renminbi over the past year?
In addition to external factors such as the weakening of the US dollar and the strengthening of non-US currencies, Professor Cao Heping from Peking University’s School of Economics analyzed several internal factors in an interview with reporters.
First, since the recovery of the Chinese economy in the fourth quarter of 2016, the economic fundamentals have shown strong resilience, and advancements in high-tech and cutting-edge technologies have been rapid; second, the increase in income and purchasing power of ordinary Chinese citizens has also provided momentum for the appreciation of the Renminbi.
Cao Heping stated that, in addition, currency serves not only as a means of payment but also as a means of storage. If the wealth contained in the Renminbi is substantial, people are willing to use it as a means of storage, which naturally puts upward pressure on the Renminbi.
What will the future of the Renminbi exchange rate be? This is a concern for many people.
Xu Hongcai, Deputy Chief Economist of the China Center for International Economic Exchanges, told reporters that the Renminbi exchange rate is expected to remain relatively stable, with possible short-term fluctuations, but the extent will not be significant.
He stated that the Chinese economy is steadily improving, and the US economy is also showing clear signs of recovery. In this context, the exchange rate will remain at a relatively balanced level.
At WorldWay Immigration Wealth Club, we sincerely aim to enrich your global financial investment perspective and advocate a high-end international quality lifestyle. With twenty years of professional top-level asset allocation experience, we strive to create an elite business exchange circle of international quality for you at the pinnacle of the pyramid. Consultation hotline: 400-186-0266
