China’s yuan has fallen 5.9% against the US dollar in the past twelve months, and reached a six-year low on Jan. 6, surprising world markets as well as plenty of people in China. Among them are the families of hundreds of thousands of Chinese students overseas, who are paying hefty tuition bills to universities and private schools in the US and Hong Kong.
In order to hedge against the yuan falling further, some of these families told Quartz they’re pulling their money out of the currency, and converting it to US or Hong Kong dollars (Hong Kong’s dollar is pegged to the US’s).
Mr. Feng, a business owner in Changchun, the capital of Jilin province, told Quartz he has been closely monitoring the yuan-to-US dollar exchange rate recently, because his daughter is heading to a US graduate school later this year. Like many other parents, he’s trying to hedge against future drops. “I just exchanged over 30,000 yuan” (US$50,000) into US dollars, he said, using his online Industrial and Commercial Bank of China account, for his daughter’s tuition, because he worries the yuan will keep devaluing.
The yuan has held relatively strong against the British pound and Australian dollar in recent months, which would make going to school there relatively cheaper, but that hasn’t changed his daughter’s school plans. “We are not thinking of going to other countries just because yuan is devaluing against US dollar,” Feng said.
Chinese students headed to the US need 4,000 more yuan now for each $10,000 they spend compared to the beginning of last year. Because annual college tuition ranges from about $20,000 to $80,000, this could mean as much as 32,000 yuan more to pay every year.
About half a million Chinese students studied abroad in 2014, and the vast majority of them, 92%, were paying their own way rather than receiving financial aid. While the falling value of the yuan against the dollar means a little belt-tightening, many of these students come from wealthy families to begin with, so they say the drop has not been that painful for them personally.
Mao Ziyang, a second year student at the University of Iowa, pays about $30,000 every year. From August to January, the exchange rate between the US dollar and the yuan rose nearly 10%, meaning tuition this semester is costing him significantly more than last. But Mao told Quartz his family hasn’t really felt the difference. “My daily spending is more or less the same, and I don’t think it has had a huge effect,” he said.
Students who are enrolled in a multi-year program in the US say they have little choice but to pay the higher amount. “I can not drop out of school just because the tuition fee is going up (under the influence of yuan devaluation)”, said Guo Suiya, a first year master of communication student from New York University.
And students are still enrolling in US schools. Sun Guiyan, who runs the US department of Vision Overseas, an agency that advises Chinese students on overseas schools, told Quartz that they have not seen any drop of applicants to study in the US since the yuan devalued.”Actually, there is a increasing trend despite the yuan devaluation,” she said.
Students in Hong Kong, where the currency is pegged to the US dollar, have also been impacted.
Margaret Liu, a postgraduate student at the University of Hong Kong, told Quartz that “I have to pay around 90,000 Hong Kong dollars for tuition in the second semester. Everything in Hong Kong is becoming more expensive for me. I will have to spend more on daily necessities as well.”
Liu’s family might have to postpone their overseas travel plans because of the yuan devaluation, she said, or go to countries where there has been little impact. Liu has been exchanging the yuan she has bit by bit for her tuition lately, by moving them from her mainland bank account at Huaxia Bank into a Hong Kong local bank.
Capital outflows are a concern for China, because they could push the value of the yuan down even further. But the amounts these families are converting are small compared to the billions of dollars that leave the country every month through other means.