What the return of Chinese tourists means for the global economy | CNN affairs



In the pre-Covid years, China was the world’s leading source of international travelers. The 155 million tourists spent more than a quarter of a trillion dollars abroad in 2019.

That generosity fell suddenly 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 global stage, sparking hopes of a recovery for the global hospitality industry.

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

China averaged some 12 million outgoing air passengers per month in 2019, but that number dropped by 95% during the Covid years, according to Steve Saxon, a partner in McKinsey’s Shenzhen office. He predicts this figure will recover to about 6 million a month by the summer, driven by the pent-up wanderlust of young, wealthy Chinese like Emmy Lu, who works for a Beijing advertising agency.

“I’m so happy [about the reopening]! Lu told CNN. “Due to the pandemic, all I could do in recent years was wander around the country. It was difficult.”

‘I’ve just been stuck in the country a little too long. I’m really looking forward to the restrictions being lifted so I can go somewhere for fun! said the 30-year-old, adding that she would most like to visit Japan and Europe.

As China announced last month, incoming travelers would no longer be quarantined from January 8, including residents returning from trips abroad, searches for international flights and accommodations immediately reached a three-year high on Trip.com (TCOM).

Bookings for travel abroad 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 the Chinese travel site. The average spend per booking increased by 32%.

The top destinations are in the Asia-Pacific region, including Australia, Thailand, Japan, and Hong Kong. The United States and the United Kingdom are also among the top 10.

“The rapid build-up in… [bank] Last year’s deposits suggest that households in China have accumulated significant liquidity,” said Alex Loo, a macro strategist for TD Securities, adding that frequent lockdowns have likely led to restrictions on household spending.

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

That’s good news for many economies affected by the pandemic.

“We estimate that Hong Kong, Thailand, Vietnam and Singapore would benefit the most if travel service imports in China 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 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 would receive a 1.2% increase.

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 mainstay industries, tourism and real estate, have been hit hard. The financial hub expects GDP to contract by 3.2% in 2022.

The city council announced on Thursday that up to 60,000 people are allowed to cross the border every day any way, from Sunday.

Several others Southeast Asian countries that rely on tourism have kept entry rules for Chinese tourists relatively lenient, 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 that will allow 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 tourist 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 encouraged” its member states on Wednesday to require a negative Covid test for visitors from China prior to arrival.

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

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

The International Air Transport Association, the airline industry’s global lobbying group, along with airports represented by ACI Europe and Airlines for Europe, issued a joint statement on Thursday calling the EU’s move “deplorable” and “a reflexive response”.

But they welcomed the additional recommendation to test wastewater as a way to identify new variants of the disease, saying it should be an alternative to passenger testing.

Restrictions aside, analysts say it will take time for international travel to fully resume as many Chinese will need to renew their passports and re-apply for a visa.

Lu from Beijing said she was still considering her travel plans, taking into account the different testing requirements and high airfare.

“The restrictions are normal because everyone wants to protect people in their own country,” she said. “I’m waiting to see if some policies are relaxed.”

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

“Time is short and I have to leave in about 10 days. People can choose a number of visa-friendly places and countries to travel to,” she said, adding that she plans to learn how to dive and buy cosmetics. Her total budget for the trip could exceed 10,000 yuan ($1,460).

Saxon said he expects 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 purchasing power,” he said, adding that countries could lift restrictions quickly when China’s Covid situation improves.

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

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