Post-zero-Covid: What the return of Chinese tourists means for the global economy


Hong Kong
CNN

In the years before Covid, China was the world’s most important source of international travelers. Its 155 million tourists spent more than a quarter of a trillion dollars outside its borders in 2019.

This amount fell sharply over the past three years as the country essentially closed its borders. But as China prepares to reopen on Sunday, millions of tourists are poised to return to the world stage, raising hopes of a recovery for the global hospitality industry.

While international travel may not immediately return to pre-pandemic levels, companies, industries and countries that rely on Chinese tourists will get a boost in 2023, according to analysts.

China averaged about 12 million outbound air passengers per month in 2019, but those numbers fell 95% during the Covid years, according to Steve Saxon, a partner in McKinsey’s Shenzhen office. He predicts that number will rebound to around 6 million per month by summer, fueled by the pent-up wanderlust of young, wealthy Chinese like Emmy Lu, who works for an advertising company in Beijing.

“I am so happy [about the reopening]! Lu told CNN. “Because of the pandemic, I could only wander around the country for the last few years. It was difficult.”

“It’s just that I’ve been stuck in the country a little too long. I can’t wait to lift the restrictions so I can go somewhere for fun! said the 30-year-old, adding that she most wanted to visit Japan and Europe.

A traveler at Beijing Capital International Airport on Friday, March 30.  December 2022.

As China announced last month, it will no longer subject incoming travelers to quarantine starting January 8, including residents returning from overseas travel, searches for international flights and accommodations immediately hit a three-year high on Trip.com ( TCOM ).

Bookings for overseas travel during the upcoming Lunar New Year holiday, which falls between January 21 and January 27 this year, are up 540% from a year ago, according to data from Chinese travel site. Average spend per order rose by 32%.

Top destinations are in the Asia-Pacific region, including Australia, Thailand, Japan and Hong Kong. The US and UK also ranked in the top 10.

“The rapid build-up in… [bank] Deposits over the past year suggest that households in China have accumulated significant cash holdings,” said Alex Loo, a macro strategist for TD Securities, adding that frequent shutdowns are likely to have curbed household spending.

It could be “revenge spending” by Chinese consumers, mirroring what happened in many developed markets when they reopened early last year, he said.

This is good news for many economies affected by the pandemic.

“We estimate that Hong Kong, Thailand, Vietnam and Singapore would benefit most if China’s travel services imports were to return to 2019 levels,” Goldman Sachs analysts said.

Hong Kong – the world’s most visited city with just under 56 million arrivals in 2019, most of them from mainland China – could see an estimated 7.6% increase in GDP as exports and tourism revenues increase, they said. Thailand’s GDP could be increased by 2.9%, while Singapore’s would see an increase of 1.2%.

Elsewhere in the world, Cambodia, Mauritius, Malaysia, Taiwan, Myanmar, Sri Lanka, South Korea and the Philippines are also likely to benefit from the return of Chinese tourists, according to research by Capital Economics.

Hong Kong has suffered particularly acutely from the closure of its border with mainland China. The city’s pillar industries in tourism and property have been hit hard. The financial hub expects GDP to have fallen by 3.2% in 2022.

The city council announced on Thursday that up to 60,000 people will be allowed to cross the border daily each way, starting on Sunday.

Several others Southeast Asian countries that rely on tourism have kept entry rules relatively relaxed for Chinese tourists, despite the record-breaking Covid-19 outbreak that has swept through China in recent weeks. They include Thailand, Indonesia, Singapore and the Philippines.

“This is one of the opportunities for us to accelerate economic recovery,” Thailand’s health minister said this week.

New Zealand has also waived testing requirements for Chinese visitors, which were the country’s second-largest source of tourism revenue before the pandemic.

But other governments are more cautious. So far, nearly a dozen countries, including the United States, Germany, France, Canada, Japan, Australia and South Korea, have mandated testing.

The European Union “strongly urged” its member states to require a negative Covid test for visitors from China before arrival.

There is clearly “conflict” between tourism authorities and political and health authorities in some countries, said Saxon, who leads McKinsey’s travel practice in Asia.

Airlines and airports have already blown up the EU’s recommendations for testing requirements.

The International Air Transport Association, the airline industry’s global lobby group, along with airports represented by ACI Europe as well as Airlines for Europe, issued a joint statement on Thursday, calling the EU move “regrettable” and “a knee-jerk reaction”.

But they welcomed the additional recommendation to test sewage as a way of identifying new strains of the disease, saying it should be an alternative to testing passengers.

In addition to restrictions, it will take time for international travel to fully recover because many Chinese will have to renew their passports and reapply for visas, according to analysts.

Lu, from Beijing, said she was still considering her travel plans, given the various testing requirements and the high price of flying.

“The restrictions are normal, because everyone wants to protect people in their own country,” she said. “I will wait and see if any guidelines will be relaxed.”

Liu Chaonan, a 24-year-old in Shenzhen, said she had initially wanted to go to the Philippines to celebrate the Chinese New Year, but did not have time to apply for a visa. So she switched to Thailand, which offers quick and easy electronic permits.

“Time is short and I have to leave in 10 days. People can choose some visa-friendly places and countries to travel to,” she said, adding that she plans to learn scuba diving and wants to buy cosmetics. Her total budget for the trip may exceed 10,000 yuan ($1,460).

Saxon said he expected China’s outbound international travel to fully recover by the end of the year.

“In general, individuals are pragmatic and countries will welcome Chinese tourists because of their spending power,” he said, adding that countries could quickly lift restrictions once the Covid situation improves in China.

“It will take time for international tourism to pick up, but it will come roaring back when it does.”

Leave a Reply

Your email address will not be published. Required fields are marked *