Short-term effect called limited, especially for those now studying in europe

The devaluation of the renminbi will affect Chinese spending overseas but industry analysts say the impact in Europe will hardly be felt in the short term.

On Aug 11, the People's Bank of China, the country's central bank, cut the yuan's reference rate to 6.2298 against the US dollar, which it described as a one-off move to improve the exchange rate fixing system, making it more reflective of the market.

The German exhibition booth at the International Education Expo in Beijing. The devaluation of the renminbi has few effects on Chinese students in Europe, experts say. Provided to China Daily

The central parity rate of the yuan was 10.02 against sterling on Aug 19, according to the China Foreign Exchange Trading System, moved from 9.572 on Aug 11, when the yuan was devalued by about 2 percent against the dollar, the largest single-day drop since 1994. The yuan fell for three days against the dollar, making for an accumulated 3.5 percent fall since Aug 11, before rising on Aug 14 by 0.05 percent.

The central parity rate of the yuan was reduced to 8.2467 per euro on Aug 11, and then went to 7.0548 on Aug 19.

People who will first feel the effect of the yuan's depreciation in China include those who have made plans to study abroad, people considering outbound travel in the near future and those using overseas online shopping sites.

"Currently, the yuan devaluation has few effects on students who are starting their autumn semester in the United States, but if it is further devalued against the dollar this could influence their decision to study in the US," says Yi Yan, deputy director of the American section at Chivast Education International, an agency that helps Chinese students with applications for overseas universities, who says the yuan's devaluation will increase the cost of studying there.

Its depreciation will also have ramifications on different industries in China, with workers potentially facing a change in income that could determine whether or not they send their children abroad for education, Yi says.

The impact of the currency exchange rate fluctuation has barely registered on students who intend to go to Europe, however. "For students pursuing a master's program in the United Kingdom, I don't think the yuan depreciation will exert any influence on them, including their parents, as the UK program only lasts one or two years," says Liu Fengjie, director of the UK section at Chivast, which is also affiliated with the Chinese Service Center for Scholarly Exchange at the Ministry of Education.

For students studying in cities other than London, generally the annual expense including tuition and living costs is about 200,000 yuan ($31,248; 28,080 euros). For those studying in London, the living cost rises by about a third, bringing the total to between 250,000 yuan and 300,000 yuan, Liu says.

Yan Jie, whose son will go to the United Kingdom in September for a one year master's program in business, does not think the devaluation of yuan will affect his family too much and that he can afford the slight rise in his son's living costs abroad. He believes the unexpected additional cost is nothing compared with the quality of the education and the prospects for his child.

"As the yuan has been appreciating against sterling since 2008, when the yuan's reference rate remained between 16 and 17 yuan per pound, the current depreciation in the yuan means almost nothing for Chinese parents whose children plan to study in the UK," says Liu, adding that there will be an obvious effect on this group only when the depreciating trend of the yuan surpasses the 2008 level. "The longer the length of schooling, the larger the impact, especially on those sent to the UK for high school education."

Zhang Yang, from the German section of Chivast, says: "For those students seeking to study in Germany, I think the effect is negligible, as public universities in Germany are free for international students, except some English-taught programs."

The majority of academic programs in Germany - 80 percent - are taught in German, while the rest are taught in English.

"Many Chinese students go to Germany for master's programs, and the annual expense of studying in Germany is between 40,000 yuan and 60,000 yuan, a lot cheaper than the cost of studying in the US or in the UK," says Zhang, adding that if the yuan devaluation continues further, it will be the US and the UK markets that witness an impact first.

Tourism companies say the devaluation of the yuan will have limited influence on outbound tourism in the short term.

Dai Yu, marketing director for online travel giant Ctrip's tourism department, says: "Because the yuan is not expected to continue its slide against the dollar, the price variation of tourism products is maintained within a small range, and people's enthusiasm for outbound tourism wouldn't be affected substantially. Moreover, with the continuous increase of people's income and relaxed visa requirements for Chinese tourists, outbound travel is still booming.

"The procurement of tourist products by travel agencies is often finished half a year in advance, especially long-distance tourism to Europe. Besides, the fees for outbound package tours, including the flight price, is usually settled in yuan, so the fluctuation in the exchange rate has little influence on them.

"The yuan has appreciated as much as 40 percent over the years. The current devaluation is just a reparative adjustment, so it will not affect the price of outbound package tours in the short term. However, if the yuan continues to depreciate, the prices might rise. We estimate the possibility is very small," Dai says.

Package tours lasting 10 to 15 days to European countries usually cost between 10,000 and 20,000 yuan during the summer's peak season.

Wu Qijuan, a spokeswoman for the online leisure travel company Tuniu, says the devaluation of the yuan affects the purchasing power of tourists in Europe.

Zhang Xue, 27, an English teacher from a primary school in Beijing, says: "I planned an independent trip to the UK during the National Day holiday (in October) but after the yuan depreciated, I will have to spend more money on local accommodations, transportation and shopping. I am considering giving up my tour."

Yang Jinsong, a professor at the China Tourism Academy, says the cost of individual outbound travel will no doubt increase and tourists who are keen on buying cosmetics, luxury handbags, expensive watches and jewelry in Europe will have to spend more on such things.

In the online sector, Chinese customers are complaining more on social media about anticipated losses if they continue to buy overseas products online. However, statistics from online overseas shopping websites have not shown any noticeable change in trade.

Liu Jia, director of brands at Haituncun.com, a cross-border e-commerce platform, says the depreciation of the yuan has had a very limited effect on business because most customers are regulars used to buying overseas products.

"The change in currency exchange rates plays a much smaller role in our business than the popularity of foreign brands in China and the quality of products," says Liu. "However, for those customers who serve as overseas purchasing agents, the fluctuation in currency exchange will have a more direct and larger influence on their shopping behavior."

"The impact on Chinese online customers for overseas goods varies according to the kind of products they usually shop for," says Mo Daiqing, director of online retail with the China E-commerce Research Center, a major third-party research institute in China.

"For those customers who have a continuing demand for mother and baby products, the effect of the yuan devaluation can almost be ignored, while luxury goods aficionados might reduce the frequency of buying high-end bags or watches."

If the yuan further depreciates against the dollar, a growing number of Chinese online shoppers will calculate and compare the cost of purchasing overseas products on shopping websites with domestic prices for the same items, Mo says.

Contact the writers at huangying@chinadaily.com.cn and fanfeifei@chinadaily.com.cn

(China Daily European Weekly 08/21/2015 page8)