Side Effect Of Euro Depreciation: More Chinese Tourists, Shoppers, Students?

Middle-Class Chinese Excited At Possibility Of Cheaper Luxury Shopping And Travel To Europe

Will more Chinese tourists take advantage of a more favorable euro exchange rate this summer?

Will more Chinese tourists take advantage of a more favorable euro exchange rate this summer?

With the eurozone caught up in one of its most critical economic situations in recent history, the Chinese-language media is buzzing about the possible benefits that further devaluation of the euro may have for Chinese consumers — specifically those who hope to travel, shop or study in Europe. Nevermind the broader economic implications, positive or negative, that a prolonged euro crisis would have on the Chinese economy (see Michael Pettis’s excellent commentary on the trade implications of the euro crisis for China for more detail on that), many articles in China are focusing on the “discount” that Chinese shoppers would see in Europe on LV bags, and possibly on imported European items, as a result of further euro depreciation.

A number of these articles also mention “Shopping Services,” online businesses that purchase luxury goods abroad for buyers in China to sidestep China’s high luxury tax. For more background information on these services, see this Jing Daily article from earlier this year.

Here’s a roundup of a few Chinese-language articles on this story, translated by the Jing Daily team:

“Luxury Goods Will See ‘Price Reduction’ From Euro Depreciation” (Phoenix Online)

…Some comparison shoppers have discovered that after the [euro] exchange rate fell, the prices of cosmetics and bags from famous foreign [luxury] brands dropped more than one percent.

“Currently the prices we offer because of the exchange rate changes are more affordable than ever, customer inquiries have increased but most people still hold out,” Contemporary Mall Shopping Service founder told reporters, through eurozone countries’ purchased some big brand products, individual products’ original price gets higher, price definitely will be more affordable, especially compared to at specialized boutiques in Beijing, purchasing services will offer real-time price adjustments that are “impossible at physical stores.”

This reporter found that — with the current exchange rate change of 9.3 to 9.5 — using an online luxury shopping service, a Louis Vuitton bag originally priced at 9,980 yuan has now dropped to 9,480; and a 52,000 yuan LV watch is now down to 49,000 yuan — an immediate price drop of 3,000 yuan.

Although the euro fell again, luxury industry insiders have said that the shopping “golden period” will not last long, because the price of luxury goods will be adjusted to make up for the lower exchange rate.

“Euro Depreciation Will Make Travel, Study Abroad Cheaper” (Zhejiang Online)

In the wake of the Greek crisis pulling down the euro, the euro and the British pound are gradually depreciating as the RMB grows stronger. Amid all this, have the overseas study market, travel market and shopping market had any changes?

You’ll Have to Wait For the Travel Market to Stir

“Currently Europe travel prices haven’t had a big change,” three major tour operators told reporters yesterday afternoon. Judging from current matters, euro depreciation hasn’t had much of an impact on the travel market.

“After the Spring Festival this year, the euro and British pound and other currencies depreciated but travel agents didn’t change their fees much. However, outbound tourists [to Europe] will see an obvious increase in value when shopping overseas” [said one tour operator.]

Although the current depreciation of the euro has not significantly impacted travel to Europe, according to industry analysts, consumption [by Chinese tourists] in Europe will definitely be higher than in the past. Additionally, although tour prices may go up, they’ll still be lower than in previous years.

Studying in Europe Will Be Cheaper

With the pound and euro depreciating, the happiest people will be the parents of students studying in Europe or Britain. “My daughter moved to Britain in the fall of 2008 to study, and last year I converted £30,000 to 330,000 RMB. Now that the pound is lower, I can exchange £30,000 for 290,000 RMB, which saves 20-30,000 RMB per year,” a man living in [Hangzhou’s “Shoe City” neighborhood] surnamed Sun said. Previously, to save money his daughter only came home once a year. “Now with the money we save she can come home two times a year, no problem.”

Buying Foreign Goods Will Be More Affordable

The depreciation of the euro has brought a great benefit to people, which is to say that foreign goods are cheaper in Europe. “The change in the euro exchange rate has increased the purchasing power of the RMB, which has put European luxury goods within the reach of common people, making the U.K. and France a travel and shopping paradise,” an individual in charge of European travel at the Sanqing Travel Agency said. According to their observations, the per capita spending of travelers from Jinhua (a city in Zhejiang province — JD) in Europe increased dramatically, illustrating a growing trend. Many tourists have spent more than 100,000 RMB ($14,640) each, mostly for personal consumption or for friends or family, and generally on luxury goods.

The article goes on to say that imported goods from Europe will likely get cheaper at local supermarkets, although in other stories workers at supermarkets that stock imported food items told reporters that price changes were due to “scheduled promotions.”

“Euro At 18-Month Low Against the Yuan — €10,000 Has Sunk To 17,000 Yuan” (Blog)

While preparing for a trip to Europe recently, a woman surnamed Zhang said excitedly, “I really picked the right time to travel. I got the equivalent of a 10% discount without even doing anything. With the eurozone’s economic difficulties, I heard that there are lots of bargains to be had.” Miss Zhang seemed to have her mind set on bargain hunting for luxury goods.

A woman by the name of Chen was recently smiling at the news of the European economic woes, as she saved a fortune in travel fees. Initially she was going to travel to Europe in January, but was too busy at the office so her company made her delay her trip, promising her she could go in five to six months. She remembers very clearly that the euro was 9.4: 1 against the RMB at that time, and is now down to around 8.6: 1, saving her around 8,000 yuan when exchanging €10,000. “Fortunately, this delay helped me save 8,000 kuai (RMB — JD), which’ll just make my trip to Europe that much better.”

Cartoon: “€10,000 Now Equivalent Of 17,000 RMB; Should You Exchange Foreign Currency Holdings?” (Hexun)

Illustration: Hexun Money

Illustration: Hexun Money

Woman holding LV bag: “Now it’s cheaper to go to Europe!”

Man looking at sinking euro exchange rate: “Dammit. So much for that €10,000 I had.”

Any thoughts? Will the eurozone’s economic issues and a depreciating euro cause China more harm than good? Will Chinese consumers clean up in Europe, or will luxury brands there just kick up their prices to make up for depreciation? Will a potential flood of Chinese shoppers, travelers and international students be a welcome sight in Europe?

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