【FOREX】Sliding yuan strikes foreign currency exchange stores
Foreign currency exchange stores have been suffering since Chinese yuan started to depreciate from 2015. An economic scholar said yuan depreciation indicates that the purchasing power of Chinese tourists decreases which has affected the business of local foreign exchange business.
Mainlanders spend less on weak yuan
Tourist numbers to Hong Kong fell 4.5 percent last year, the worst since 2013, mainly caused by the decline of mainland visitors, the government data showed.
“The depreciation of Renminbi caused the decrease of mainland visitors since they need to pay more to buy goods,” said Kwok Yeung Ming, the owner of China Exchange at Sheung Shui. He also said the turnover of his shop fell around 30% as main tourists exchanged less money than before.
“Most of the mainlanders only change money for necessity, such as transportation, and they don’t spend much in luxury products like before. This really affects our sales,” Kwok said.
“If mainland Chinese find that the prices of products here are higher, they have lower incentive to come, the number of visitors who go to currency exchange shop will also reduce, thus negatively affect their business,” Rita Li, professor of Economics and Finance Department of Shue Yan University said.
Hong Kong’s value of total retail sales also fell 5.7 % in February from a year ago, government data showed.
“I have no more than 20 transactions a day. It is difficult to maintain competitiveness in the foreign currency exchange market,” said Simon Chan, who owns Shuang-Hua Exchange in Prince Edward. Mainland tourists “tend to spend less in Hong Kong as the prices of the products are not attractive to them anymore,” he added.
Chan also said that he closed down a branch in Sham Shui Po since he is pessimistic about the industry.
“The PBOC can adjust their currency value through implementing monetary policy which bolsters exports from their government perspective,” professor Li said. Renminbi will continue to depreciate in the short term and that will further weaken the purchasing power of mainland visitors to Hong Kong.
“I seldom come now since the depreciation of Renminbi tends to become more serious. The exchange rate of Japanese yen is relatively attractive than Hong Kong dollar, therefore I tend to go to Japan rather than Hong Kong,” said mainland tourist Xiaoyuan Zhang.
Foreign exchange stores target local customers
Eric Wong from Rich Bird HK said that he switched target customers from mainlanders to local residents since he regarded the revenue from mainlanders as not sustainable. “Even though the Japanese yen is appreciating, Hongkongers are eager to travel to Japan due to the rise of low-cost airlines,” he said.
Rich Bird HK also uses different ways to stay competitive in the market. ”We are doing every means to provide the most convenient services to our customers, they can pre-order via whatsapp so they don’t have to waste time queuing up and make sure the customers can get their require amount of cash,” Wong said.
Rich Bird HK narrowed down the bid and ask price and aims to keep regular customers. Though Wong can only earn around $3-$5 from each transactions, he believes in slim margin by high turnover. Many foreign exchange stores do not accept coins as banks won’t trade in any coins. “I accept coins from various countries, hoping to provide differentiated services to my customers,” he added.
《The Young Financial Post 新報人財經》
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