China?s Outbound Tourist Boom: A Bonanza For Neighboring East Asia Economies

ANALYSIS

 @Gooch700
on May 01 2012 11:23 AM
A mainland Chinese tourist rests outside a cosmetic store in Mong Kok district in Hong Kong
A mainland Chinese tourist rests outside a cosmetic store in Mong Kok district in Hong Kong Reuters

One of the many aspects of China’s economic emergence has been the tremendous surge in Chinese tourism to other nations, particularly to East Asia and the Pacific Rim.

According to the China Outbound Tourism Research Institute (COTRI), more than 80 million such trips will be tallied up this year -- from 70 million overseas journeys in 2011, and a 20 percent spike from the 57.4 million trips recorded in 2010.

In accordance with the rising number of Chinese tourists, they are also spending more money when they arrive in foreign destinations.

The Chinese Tourism Academy (CTA) estimates that Chinese travelers shelled out $69 billion last year, a 25 percent jump from the $55 billion figure in 2010.

China is now the third biggest global outbound tourism source market, COTRI noted, behind Germany and the U.S. – with China rapidly closing the gap.

Taleb Rifai, Secretary-General of the United Nations World Tourism Organization (UNWTO) recently declared: We can expect to see China become the number one country in terms of both receiving and sending tourists in the next five to seven years.”

Indeed, the Chinese are benefiting from advances in transportation and communication, as well as policies established by the government, COTRI stated.

“The expanding tourist base will be demanding particular standards in order to meet their unique needs, challenging the assumption that 'western' tourist behavior is the norm in international tourism,” the group added.

COTRI indicated that China’s growing army of affluent are eager to show off to the world “their increased purchasing power in the major tourism destinations.”

According to the Chinese Millionaires Wealth Report 2011 published by Hurun, more than one-quarter (29 percent) of wealthy Chinese regularly travel to foreign lands; almost double the 16 percent figure in 2009.

“Chinese millionaires have taken on average three overseas trips in the past year, with female millionaires travelling more than male, and men more likely to travel for business,” COTRI said.

Well-heeled Chinese are particularly enamored of visiting Japan and France, while Hawaii is gradually losing its appeal.

Still, the vast majority of Chinese travelers – regardless of wealth – still travel to neighboring countries in Asia.

“As the number of people who are in a position to consider overseas travel rise, China’s Asian neighbors are likely to be the main beneficiaries,” said Victoria Lai, China Analyst at the Economist Intelligence Unit (EIU).

“This can be partly attributed to proximity and the relative ease with which Chinese nationals can obtain visas to countries like Thailand.”

Lai added that in the past few years, travel regulations for Chinese travelers were loosened in several East Asian countries, which has also boosted visitor numbers.

“For example, in the past two years South Korea, Taiwan and Japan have all relaxed visa restrictions to allow for individual tourists from China. Previously they had to travel in tour groups,” she said.

“The proximity of such destinations will allow for trips over the shorter holidays, encouraging shopping trips abroad.”

Last year, Taiwan, Korea, Singapore, Malaysia and Thailand each attracted over 1 million Chinese tourists, according to Capital Economics (CE) of London.

“Taiwan in particular has benefited from a warming of relations with the mainland and the establishment of direct flights with China,” said Gareth Leather, an economist at CE.

“The number of Chinese visitors to Taiwan nearly doubled between 2009 and 2011.”

Aside from increased wealth and relaxed travel regulations, the Approved Destination Status (ADS) agreement – which allows tour groups from China to visit other countries – now includes some 140 foreign nations as of the end of 2011.

“Independent travel [apart from trips to nearby Hong Kong and Macau] remains more difficult but is likely to increase over coming years,” Leather added.

CE also noted that Hong Kong and the gambling center of Macau have particularly benefitted from Chinese tourism -- Chinese tourists account for 67 percent and 58 percent of total inbound tourists in these countries, respectively.

“The economic impact of the Chinese tourism boom should not be underestimated,” Leather indicated.

“Due in large part to the strong growth in Chinese tourists to Macau -- who come mostly to gamble in the city’s casinos -- Macau has recorded average GDP growth of just under 15 percent since 2004.”

Leather also pointed out that tourists from China tend to spend more money on their holidays than other travelers.

“In [South] Korea, for example, Chinese tourists (mainly because of their love of shopping) spend around 20 percent more than the average tourist,” he said.

“In both Hong Kong and Taiwan, strong spending by mainland tourists has helped to sustain overall spending growth. Meanwhile, the huge success of Singapore’s gambling industry has in part been due to the surge in Chinese tourists.”

Leather believes that China’s outbound tourism numbers should continue to rise, as there is tremendous potential for upside. He cites that only about 5 percent of mainland Chinese undertakes a foreign trip each year – compared with figures of 13 percent for the Japanese, 20 percent for South Koreans and 26 percent for the Taiwanese.

“Although incomes in China are still well below the levels in those countries, based on the example of Japan, if China’s economy continues to expand as we expect, the number of Chinese travelling abroad is likely to carry on expanding rapidly for many years to come,” Leather added.

Indeed, Lai of EIU said that personal disposable income in China is expected to grow by a very strong nominal 16.7 percent a year over 2011-16, supporting a continued increase in overseas travelers.

In the future, the number of Chinese tourists travelling to Europe and other far-flung places may increase, but for the moment, such voyages represent a small portion of Chinese holidays.

Lai indicated that in 2010, about 3 million Chinese travelers visited the European Union -- a fraction of the 22.7-million visits made to the top destination that year, Hong Kong.

However, foreign travel remains largely the preserve of the upper classes of China.

Lai noted that while China has an emerging middle class, that group still tends to opt for domestic travel.

“Domestic airfare is much cheaper, and you can get to destinations via train, which is also cheaper,” she said.

“Also it is more accessible -- familiar language, familiar food, no visa needed, etc.”

She also suggested that domestic destinations are simply better known to the vast majority of Chinese people.

“On television and in print ads, promotions for local tourism destinations like Hangzhou definitely dominate,” she noted.

“And these destinations, like Huangshan in Anhui province, are familiar through Chinese art, literature, and history, which drive tourism.”

Meanwhile, China continues to buy more commercial aircraft as the country foresees an insatiable demand for foreign travel by its cash-rich citizens.

Just last week, China Eastern Airlines, the Shanghai-based carrier, awarded a $6-billion contract to Boeing Co. for twenty Boeing-777 airplanes. The 777 model, which is designed for international long-haul trips, carries 365 passengers.

The deal calls for the new jets to be delivered to China Eastern in stages from 2014 to 2018.

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