RMB appreciation stimulates outbound travel
The RMB was traded below 6.16 against the US dollar on Monday, reaching a record high of 6.1598 since China’s exchange rate reform began in 2005.
Data has revealed that the RMB has risen by about 1.7% against the US dollar since the beginning of the year, following a moderate gain of 1.03% throughout 2012. Meanwhile, the central parity rate of the RMB against the Euro and Yen has also gained 2.6% and 19% this year.
For the Chinese, the appreciation of the RMB means lower costs when traveling abroad. Travel expenses for hotel and flights for a five-day trip from Beijing to Seoul is 3,000 yuan ($489.36), lower than the price of a round-trip plane ticket to Yunnan province. Some popular foreign destinations have been using the preferential exchange rate as a selling point to attract more Chinese tourists.
With continuous RMB appreciation, foreign luxury goods which already have a price advantage become even more worthwhile to Chinese customers. Compared with ordinary items, the price of foreign luxury goods is more desirable with a favorable exchange rate.
Meanwhile, foreign luxury goods in the domestic market “enjoy” some of the highest prices in the world. Weak sales have made top luxury brands such as LV, Gucci and Burberry slow their expansion pace in China, which in turn inspires an increased outflow in consumption abroad.
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