Attract China Blog

Will Yuan Devaluation Affect Chinese Outbound Travel?

August 22, 2015

negative decreasing statistics with yuan coin vector illustrationChina’s stock market has been undergoing wild swings since mid-June. Recently, the country’s unexpected decision to devalue its currency Yuan (CNY) caused further concerns and sparked a chain reaction across world. On Tuesday, August 11, the Chinese central bank cut the Yuan’s reference rate by 1.9 percent, the most significant devaluation of the Yuan in 20 years, followed by slides of 1.6 percent and 1.1 percent on Wednesday and Thursday.

The sudden devaluation of Yuan is likely to affect Chinese outbound tourism. But does it mean fewer Chinese will travel abroad? Is China’s outbound travel boom over? The answer is no.

Chinese travelers search and book their overseas trips months in advance. With the coming of China’s National Day Holiday (October 1-7) which is also known as the “Golden Week” because it’s the peak travel season of the year, 90 percent of the flights and tours overseas have already been booked. Many Chinese have even purchased trips for their Chinese New Year Holiday next year, meaning that the recent drop of Yuan has very small impact on their travel spending.

Airline ticket with passport and Chinese currencyTravel agencies in China purchased overseas hotels, flights and attractions even earlier than individual tourists in order to put together vacation packages, and they said they would not raise prices. Although the Yuan dropped in quick succession, its exchange rates against many other currencies, such as the Australian dollar and Euro, still compare favorably with the same period last year, which along with the sharp decline in the long-haul flight fares made this year’s vacation packages 10% to 15% cheaper.

US dollar dominated destinations might worry more than others. However, only a slight impact can be found on the market prices of travel products and services to the US. Even if the US dollar rose 1% against the Chinese Yuan, the price difference for a 10000 Yuan (1565 US dollar) vacation package to the US would be less than 50 Yuan (8 US dollar). So, rather than discouraging Chinese from traveling abroad, the Yuan devaluation affects more on their spending while they are already in the destination cities.

“The devaluation has certainly had an impact and will do so in the short term,” said Michael P. DiCarlo, VP of Attract China. “However, in the longer term, it will have positive effects on China’s economy and the growth of its middle class, which will in turn ensure the continued growth in Chinese outbound travel.”

The underlying demand for overseas travel in China is sound. With the rising disposable income and the relaxing visa rules, more than 120 million Chinese people are expected to travel abroad by the end of this year and to spend billions.

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