Liu Minxia

CONSUMPTION habits are gradually changing among Shenzhen residents as the yuan continues to appreciate against the U.S. dollar.

A small group of local residents who receive their salaries in U.S. dollars or Hong Kong dollars are worried about the value of their income eroding at a rapid pace while the majority who get paid in yuan are becoming more inclined to shop in nearby Hong Kong to cash in on the yuan rise.

When American Jonathan Hyman first came to Shenzhen four years ago, he would get about 8.3 yuan (US$1.19) for every single U.S. dollar he received from his U.S. employer, International SOS. But now, he gets 16 percent less when he converts his U.S. dollars into the yuan. The central bank set the yuan’s daily mid-point at 7.0025 to the U.S. dollar yesterday.

“I have been worried about this,” Hyman said. He said he would convert his Hong Kong dollar assets into yuan as soon as possible and ask his employer for a pay rise to counter the exchange losses.

Those who get paid in Hong Kong dollars have to try even harder to save.

“The yuan is rising and the consumer price index (CPI) is rising too. We are feeling the crunch now,” said a man who works for a Hong Kong company in Shenzhen and only identified himself by his surname Wu. “With the same amount of Hong Kong dollars in our salary, we are actually underpaid compared with our colleagues in Hong Kong.” Wu and his Shenzhen colleagues said they were asking their Hong Kong headquarters for a pay rise to offset the exchange losses.

The yuan climbed to 0.899 to the Hong Kong dollar yesterday, appreciating about 16 percent from the 2005 exchange rate of 1.06 yuan per Hong Kong dollar.

The shift has changed the dynamics of the retail markets in the two cities and eroded Hong Kong residents’ interest in shopping across the border.

Many shopkeepers near the border in Shenzhen have stopped accepting Hong Kong dollars, or begun asking for more Hong Kong dollars than the yuan amount on the price tag, and others said they saw fewer customers from Hong Kong.

“Compared with the exchange rate difference, the change in Hong Kong consumers’ psychology is more significant,” said a shop owner surnamed Zhuang in the Dongmen commercial area. Zhuang is from Hong Kong and he said his shop had been receiving less Hong Kong consumers in the recent months.

In contrast, Shenzhen residents, who have long been taking advantage of the city’s vicinity to the shopping paradise, now spend more across the border. According to figures released by Hong Kong authorities, the retail industry in the city raked in HK$257 million (US$33 million) in January, up 23.2 percent from a year earlier, and the total sales of the city’s retail sector in the first two months of the year rose 16.4 percent from a year ago. The Hong Kong authorities said in an analysis that visitors from Shenzhen and other mainland regions have become a strong purchasing force in the retail market.

Meanwhile, a new trend has been seen among Hong Kong residents as the yuan continues to rise. Many Hong Kong people are now choosing to save in yuan and some have even begun opening yuan bank accounts across the border since Hong Kong’s savings deposit rate was cut to close to zero early last month. Yuan deposits in Hong Kong jumped 18.3 percent to 47.8 billion yuan at the end of February, the highest level since Hong Kong banks were allowed to conduct yuan business in 2004, the Hong Kong Monetary Authority said earlier this month.