Chinese citizens are traveling more post-pandemic. And the elevated overseas spending could further weaken the Chinese currency Yuan, which already shows signs of weakness.
With more yuan being converted to foreign currencies for travel, the tourism industry will be boosted but the nation's monetary policy may face more challenges.
The policymakers are now tasked with balancing the positive effects of increased tourism on the economy against the potential devaluation of the currency.
There are broader economic implications at play here. The yuan has already experienced a 1% fall against the dollar this year, which is deterring rate cuts. This depreciation of the yuan is curtailing the scope of monetary easing. The central bank’s decision to leave the medium-term policy rate unchanged, despite market expectations, is an indicator of this circumstance.
With signs of a weaker currency, there is an increasing need for additional stimulus measures to handle weak credit growth and persistent deflationary pressure in the Chinese economy.
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