One Yuan Now Buys Just One Hong Kong Dollar -- in 7-Elevenby
Businesses are growing reluctant to hold yuan, Daiwa says
Yuan is a way off parity on foreign exchange markets
In a sign of how far confidence in China’s currency has fallen, 7-Eleven stores in Hong Kong are valuing the Chinese currency at par with the city’s dollar.
Just three years ago, one yuan fetched 1.28 Hong Kong dollars on the foreign currency market. While China’s currency would need to fall at least 12 percent to reach actual parity with the Hong Kong dollar, the exchange rate offered by the city’s largest operator of convenience stores shows how depreciation pressures are making the yuan less attractive to hold.
Hong Kong’s currency is pegged to the greenback -- against which the yuan has plunged 13 percent since its peak in January 2014. With the city having grown reliant on an army of cashed up mainland shoppers in recent years, the stronger local currency has hammered retail sales in the former British colony. For China’s government, a growing reluctance by businesses to hold yuan threatens its aims to have a global currency that rivals the greenback.
"The recent sharp yuan depreciation has hurt local merchants’ willingness to accept yuan," said Kevin Lai, chief economist for Asia excluding Japan at Daiwa Capital Markets in Hong Kong. "The fact that they demand a bigger premium in the exchange rate to accept yuan payments shows the outlook is pretty negative for the Chinese currency."
7-Eleven has more than 900 stores in Hong Kong and is part of Jardine Matheson Holdings Ltd.’s Dairy Farm unit. A shop in one of the chain’s stores in the Central business district had a sign showing 100 yuan equaled 100 Hong Kong dollars.
7-Eleven adjusted its yuan rate "in light of recent drastic fluctuations" in the currency and will change it "whenever necessary," a company spokesman said in an e-mailed reply to questions.
Signs in Circle K, another major convenient store chain in the city, offer an exchange rate of 100 yuan per 105 Hong Kong dollars.
The Hong Kong dollar was little changed at 1.12 per yuan at 4:30 p.m. on Friday.
Hong Kong linked its currency to the greenback in 1983 and retained its monetary system when the British government handed the territory back to China in 1997. The yuan last traded at parity with the Hong Kong dollar in 2007.