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As Yuan Weakens, Chinese Households Rush to Open Foreign Currency Accounts

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Since October, the government has acted to slow outflows by tightening existing measures, such as approvals for foreign currency transfers, and has leant on banks to be stricter, making it harder for companies and individuals to change money and transfer money abroad.

SHANGHAI: Zhang Yuting lives and works in Shanghai, has only visited the United States once, and rarely needs to use foreign currency. But that hasn’t stopped the 29-year-old accountant from putting a slice of her bank savings into the greenback.

“Expectations of capital flight are clear. I might exchange more yuan early next year, as long as I’ve got money.”

She is not alone. In the first 11 months of 2016, official figures show that foreign currency bank deposits owned by Chinese households rose by almost 32 per cent, propelled by the yuan’s recent fall to eight-year lows against the dollar.

The rapid rise – almost four times the growth rate for total deposits in the yuan and other currencies as recorded in central bank data – comes at a time when the yuan is under intense pressure from capital outflows.

The outflows are partially a result of concerns that the yuan is going to weaken further as US interest rates rise, and because of lingering concerns about the health of the Chinese economy.

US President-elect Donald Trump’s threats to declare China a currency manipulator and to impose punitive tariffs on Chinese imports into the US, as well as tensions over Taiwan and the South China Sea, have only added to the fears.

“Expectations of capital flight are clear,” said Zhang, who used her yuan savings to buy US$10,000 this year. “I might exchange more yuan early next year, as long as I’ve got money.”

Household foreign currency deposits in China are not huge compared to the money that companies, banks and wealthy individuals have been directing into foreign currency accounts and other assets offshore.

All up, households had US$118.72 billion of foreign money in their bank accounts at the end of November, while total foreign currency deposits were US$702.56 billion.

But the high growth rate in the household forex holdings are symbolic of a growing headache for the government as it struggles to counter the yuan’s weakness.

Since October, the government has acted to slow outflows by tightening existing measures, such as approvals for foreign currency transfers, and has leant on banks to be stricter, making it harder for companies and individuals to change money and transfer money abroad. Read the rest of this entry »

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[BOOKS] Erwan Rambourg’s ‘Bling Dynasty’

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In 2011, Erwan Rambourg was a six-year veteran of the luxury industry as an analyst for HSBC, based in Paris, a city that many high-end brands call home.

“The balance is story-telling. Luxury consumers are like kids. Brands are a dream, an aspiration.”

That year, he moved to Hong. While the brands were European, the consumption was shifting eastward toward China. “The reason I moved to bling-dynastyHong Kong was to try to understand better the trend and how the Chinese were consuming,” he said.

[Check out Erwan Rambourg’s book “The Bling Dynasty” at Amazon.com]

After three years of observation, the 41-year-old Mr. Rambourg, who continues to cover the sector for HSBC, has put together his insights into the industry in a new book, Bling Dynasty: Why the Reign of the Chinese Luxury Shoppers Has Only Begun.

“If you get the impression that you’re the only one, that you’re unique and being the only one told the story, you’ll pay up. If you feel like everyone else, you won’t.”

He recently spoke with China Real Time about how China’s luxury consumption is different, why the corruption crackdown is a good thing and how Chinese and American consumers are becoming more alike.

“You have to develop the illusion or reality of scarcity.”

Edited excerpts:

Take us back to when you first arrived in Asia. What was the luxury landscape like?

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The luxury sector 20 years ago was driven by European consumers. Ten years ago, it was driven Japanese consumers, with the hope that Chinese consumers would eventually take over. Today, the Chinese are the key driver. In 2015, Chinese consumers will become 35% of luxury consumes.

The development of the Chinese luxury market is often compared to that of Japan. But you see vast differences.

They’re considered similar by investors but the differences lie in culture and how the markets are built. First, gender: The Japanese market was centered on the office lady. These are secretary-types who were living with parents, allocating most of their income to their next handbag.

The Chinese market was built by men. The core consumer was male, businessman, a lot of corporate gifting, instead of self-purchasing.

Today, the core consumer in Japan is female and aging. The core consumer in China is diverse. You still have the businessmen, but you have the emergence of young, female shoppers and a whole diversity of consumer profiles you don’t see in Japan.

Currently in Japan, there’s a move away from luxury and brands. They’re looking for more holistic experiences: Instead of a handbag, they’re going to a spa. Read the rest of this entry »


How Hong Kong’s Maid Trade is Making Life Worse for Domestic Workers Throughout Asia

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Lily Kuo writes:  Every few years, the city of Hong Kong is rocked by news that another foreign domestic worker has been badly abused by her employer. Last month, 23-year-old Erwiana Sulistyaningsih told authorities that she had been beaten daily, hit with mops, rulers, and clothes hangers until she could no longer walk.

But Hong Kong’s treatment of the thousands of women who are known here as “helpers” has ramifications beyond a case of physical abuse. The city’s double standard for foreign domestic wages and its increasingly strict policies are making conditions worse for hundreds of thousands of women across the entire region, where almost half of the world’s domestic workers are employed.

Hong Kong's Domestic Help System Under Scrutiny Following Recent Cases Of Abuse

Globally there are 53 million domestic workers, mostly women, according to a conservative estimate by the International Labor Organization (ILO)—that’s an increase of almost 60% since the mid-1990s, and the ILO says the true figure may be closer to 100 million (pdf, p. 19). Some 41% of them are working in the Asia Pacific region, where keeping hired help has long been a tradition from the lower middle class to the wealthiest of families.

Read the rest of this entry »