CHINA. A managed fall in the value of the Chinese Yuan and worsening civil unrest in Hong Kong are threatening key sectors of the travel retail industry.
The Chinese currency today fell below the critical benchmark of seven Yuan to the US Dollar – the first time it has breached that level in over a decade, according to CNN.
Analysts are blaming the fall on the worsening trade war between the US and China after the former’s President Donald Trump last week imposed a further 10% tariff on US$300 billion worth of Chinese exports to the US. Beijing is likely allowing currency depreciation to counter President Trump’s latest tariff moves, Bloomberg said.
The Yuan’s fall to below the seven Yuan to the US Dollar mark came after the People’s Bank of China set its daily reference rate at 6.9225, the lowest point since December 2018.
“In Mainland China, one US Dollar now buys about 7.0188 Yuan. In trading outside of China, where the Yuan moves more freely, the Yuan stands at 7.1114 to the Dollar — a record low in the offshore market,” CNN commented.
In travel retail terms the impact is straightforward – a weaker national currency means lower spending power abroad in any Dollar-based or Dollar-linked market. With the Chinese so fundamental to the global travel retail sector’s health, retailers and brands alike are monitoring the situation anxiously.
Hong Kong plunged into chaos
Meanwhile, the extraordinary civil unrest in Hong Kong – a major travel retail location, including at the airport, on the train system to the Mainland and for DFS Group downtown – escalated to new levels today, as a ninth consecutive week of protests initially sparked by the introduction of a controversial (now-suspended) extradition bill began.
A wave of strikes today is crippling public transport (particularly the MTR subway system), causing multiple flight delays and cancellations, and affecting all sectors of society. Protests are taking place across seven of Hong Kong’s main districts in the biggest show of public resentment yet.
Controversial Hong Kong leader Carrie Lam today held a press conference at which she refused to stand down (one of the protesters’ demands) or free those who have been jailed. She said that the protests have hurt Hong Kong’s economy and commented, “Our economy and livelihood have started to show signs of problems. Our society is becoming unsafe and unstable.”
Ms Lam said that the demonstrations “are pushing our city… to the verge of a very dangerous situation”.