Retailers and hotels across the country geared up last weekend in order to tempt one of the fastest growing demographic segments in the country — Chinese tourists. From festivities including extravagant fireworks’ displays, specially curated menus and world-renowned circus acts exclusively organised on the occasion of Chinese New Year, these visitors had the chance to celebrate the event in style.
In 2012 alone, approximately 250,000 Chinese tourists travelled to Dubai, either on holiday or business visits according to figures from the Dubai Department of Tourism and Commerce Marketing. The first half on 2013 also saw the Emirate attract over 143,000 Chinese visitors, a 16 per cent increase compared to the same period in the previous year.
With Dubai winning the bid to host the World Expo in 2020, this number is set to continue increasing substantially over the next decade. The event will bolster trade between the two countries, which grew nearly 14 per cent in the first half of 2013 reaching over $21 billion compared to the same period in 2012. In addition, the Expo is expected to bring in over 25 million visitors, and with a large number of these being from China, this demographic will continue to grow in importance.
The growing pool of new visitors and shoppers from the Chinese market are also having a visible impact on the way businesses are operating in the country. Hotels and retailers are increasingly recruiting Chinese staff in order to better cater to this segment. This is not surprising considering the UAE has grown to become among the top three luxury destinations of choice for wealthy Chinese tourists.
Internationalisation of the Renminbi
HSBC forecasts that average incomes in China will increase sevenfold between 2013 and 2050, from their current level of $2,500. Over the past 10 years, the renminbi (RMB — also known as the yuan) has risen more than 35 per cent against the dollar and sterling, and about 10 per cent against the Euro. The RMB is not only underpinned by sound fundamentals, but its further appreciation against the US dollar is part of broader Chinese economic policy.
The importance of this is underlined by the growing internalisation of the RMB, which is increasingly closing the gap against the US dollar as a global reserve currency. As part of the Chinese government’s desire to promote the currency beyond its borders, they have been encouraging the economy to move from a reliance on investment towards that of greater consumption. In addition to encouraging the use of RMB for trade settlement, increased travelling and work assignments abroad by Chinese citizens would aid in driving consumption.
HSBC estimates that the number of overseas trips made by Chinese tourists globally will continue to grow over the decade, rising from 83 million in 2012 to 200 million by 2020. This will have big implications for global retailers as the Chinese have different motivations for travelling overseas compared to Europeans and Americans. Research indicates that shopping far surpasses sightseeing as the most favoured activity for the East Asians, with 60 per cent of overall travel costs allocated to this activity.
We have also seen that the growth of tourists from China and in the number of Chinese nationals living in the UAE, and the RMB is also being increasingly used in the country’s retail sector. Soon, the tourist yuan may be just as recognisable and welcome as the tourist dollar.
Opportunities for Investors
Just as the Chinese have benefitted from the growing value of the RMB, so too can investors across the world take advantage of the potential benefits from investing in the currency.
In 2013, we saw a noticeable shift in the attitude of the Chinese government towards foreign investment in its markets. There has been a marked increase in the focus on liberalisation and as these Chinese markets have opened up, there have been increasing opportunities for retail investors to tap the growth in these areas.
To capitalise on this, a number of banks have looked to expand their suite of RMB products in the Middle East to help retail and wealth customers capture the potential of this emerging currency.
HSBC recently launched a range of RMB deposit account and services which include RMB current, savings and term deposits that will allow retail customers to take advantage of the bank’s global scale and deep understanding of the Chinese market. This is in response to an evident increase in investor interest in the currency, especially amid renewed growth expectations of the Chinese economy.
Consequently, the time is ripe for savvy investors to benefit from the growing internationalisation of the RMB to diversify their portfolios and take advantage of the Asian giant. Especially as the Chinese economy continues to grow at a strong pace, these investment offerings, such as in offshore bond markets, offer lucrative long term investment options. In fact, the offshore RMB bond markets returned nearly 7 per cent last year — one of the best outcomes from any bond market anywhere. Despite the slight slowdown in the overall growth of the country last year, the prospects for this market remain strong with risks skewed in the investors’ favour and a good chance for continued stable and reliant returns.
For customers looking to benefit from growth in Asian markets HSBC UAE offers the ‘Managed Solution — Asia Focused’ which provides access to three portfolios for customers looking to invest in Asian equity and fixed income asset class.
Investing in the RMB also presents new opportunities for investors looking to take advantage of the medium-to long-term appreciation of the currency compared to other major currencies around the world. Although it is unlikely that the RMB will overtake the dollar soon, the Chinese currency’s rapid growth has shown that it is only a matter of time until it reaches the same level as a reserve currency.
— Andy Ripley, HSBC’s Head of Retail Banking and Wealth Management for UAE