By: Edwin Fuller
Founder and President of Laguna Strategic Advisors
All last week, the world’s financial markets were roiled by China’s 4.4% devaluation of its currency, the yuan, also known as the renminbi (RMB). It was the currency’s largest devaluation in decades and, not surprisingly, almost everyone even remotely interested in China was concerned. The biggest concern revolved around the state of the Chinese economy that now ranks as the world’s second largest after the US. Seeking to ease the uncertainty, the People’s Bank of China called the move a one-off depreciation, saying it was aimed at boosting its private sector exports by cutting their costs, increasing their competitiveness and enhancing performance.
So, should you be concerned? From where I sit, if you have plans to visit China someday, climb the Great Wall, marvel at the futuristic skyline of the Shanghai Bund or visit the Terra Cotta Soldiers of Xian, book your flight today. With the yuan valued at 6.39 to the $1, now is the time to act on your dreams. It’s been quite a while since your US dollar has had so much buying power in China.
But, what if you’re in the business of hosting, selling and catering to the Chinese traveler visiting the US today? Will the Chinese stop traveling now that their currency has been devalued? The news is good from this perspective as well. While not posting annual double-digit growth rates as it had not too long ago, China’s economy remains strong. Her 1.4 billion people saw their economy grow 7.7% in 2014 as their household consumption rate shot up by 10.8% year over year.
Last year, 114 million Chinese residents traveled outside their country, double the level in 2010 and predications remain in place that by 2020, this number will leap to 200 million outbound travelers. In 2014, some 2.2 million of these travelers visited the US, an increase of 21%. Travel remains the number one preferred leisure pursuit of China’s middle and upper class. Best of all, visiting the US remains a strong aspirational destination for 54% of its long-distance travelers, second only to France which ranks first at 58%.
So while last week was an unsettling time for many, the key now is to “keep your eye on the prize.” As I was writing this blog, Institutional Investor reported that the People’s Bank of China had raised the domestic spot rate .11% against the dollar. Hopefully this move will help encourage the world’s financial markets to settle down. The Chinese travel market is huge and growing while the desire for travel among its members is palpable. Keep your welcome mat out—you’ll be richly rewarded.