Post-Zero-Covid: What the Return of Chinese Tourists Means for the Global Economy


Hong Kong
CNN

In the pre-Covid years, China was the world’s top source for international travellers. Its 155 million tourists spent more than a quarter trillion dollars outside its borders in 2019.

That generosity has plummeted 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 for a recovery in global hospitality.

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

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

“I’m so happy [about the reopening]! ‘ Lu told CNN. “Because of the pandemic, I’ve only been able to roam the country for the last few years. It was hard.”

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

A traveler at Beijing Capital International Airport on Friday 12th 30th, 2022.

As China announced last month, from Jan. 8 it would no longer quarantine inbound travelers, including residents returning from overseas trips. Searches for international flights and accommodations immediately hit a three-year high on Trip.com (TCOM).

Bookings for international travel during the upcoming Lunar New Year holiday, which falls between Jan. 21 and 27 this year, are up 540% year-on-year, according to data from Chinese travel site. 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 also rank in the top 10.

“The rapid build-up in… [bank] Deposits over the past year suggest that households in China have accumulated significant cash reserves,” said Alex Loo, macro strategist at TD Securities, adding that frequent lockdowns have likely led to restraints on household spending.

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

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

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

Hong Kong — the world’s most-visited city with nearly 56 million arrivals in 2019, most of them from mainland China — could see an estimated 7.6% increase in GDP as exports and tourism revenue surge, they said. Thailand’s GDP could increase 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 Capital Economics research.

Hong Kong has been particularly hard hit by the closure of its border with mainland China. The city’s pillar industries, tourism and real estate, have been hit hard. The financial hub expects GDP to have contracted by 3.2% in 2022.

The city government announced on Thursday that up to 60,000 people would be allowed to cross the border every day there and back, from Sunday.

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

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

New Zealand has also waived testing requirements for Chinese visitors, who were the second largest source of tourism revenue for the country 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 ordered testing.

The European Union on Wednesday “strongly encouraged” its member states to require visitors from China to have a negative Covid test before 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 blasted EU recommendations for testing requirements.

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

But they welcomed the additional recommendation of testing sewage to identify new variants of the disease, saying it should be an alternative to testing passengers.

Aside from the restrictions, it will take time for international travel to fully recover as many Chinese will need to renew their passports and apply for visas again, according to analysts.

Lu from Beijing said she is still considering her travel plans, considering the various testing requirements and the high fare of the flight.

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

Liu Chaonan, a 24-year-old from Shenzhen, said she originally wanted to go to the Philippines to celebrate Chinese New Year but didn’t have time to apply for the visa. So she switched to Thailand, which offers quick and easy electronic permits.

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

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

“In general, individuals are pragmatic and countries will welcome Chinese tourists based on their purchasing power,” he said, adding that countries could quickly lift restrictions if the Covid situation in China improves.

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

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