Will foreign tourists save the Chinese economy?

The Far East is not famous for its openness, which is particularly true for China both in an economic and social sense. Even though China is on the list of the world’s most visited countries, its exclusiveness and political conflicts are rather disadvantageous to tourism. However, tourism has a major role in the economic paradigm change, and it can offer yet unexploited benefits for the country.

For years, we have known that there are problems with the Chinese economy, for example, IMF gave a warning sign about the debt that they say could grow up to 300% of the country’s GDP by 2020. Authorities has also been saying that, even if slowly, but surely, the economic recovery model will change from the current credit-fuelled and investment-centred to a more consumption-oriented structure.

The services sector with an ever-growing significance has a big role in it, and eventually, it could become the engine of recovery. However, a country with such cultural and natural assets like China, tourism cannot be left neglected. Yet, the exclusivism so typical for its economy does have an impact on its tourism as well.

There are numerous obstacles ahead of the Chinese tourism

It is relatively well-known that the Chinese society is not among the most open ones, and its roots trace back to the Confucian mentality. The extremely small number of foreign settlers and immigrants is also a proof to it; according to the most recent estimates in 2013, in the country of 1.4 billion people, only 1 million of its inhabitants are foreign.

However, the Chinese discovered the economic bounties of tourism; from the 1970s, the country has been opening its gates to people from abroad. For decades, the Chinese state mobilised serious resources (10 billion dollars annually) to popularize Chinese and found overseas universities or to directly boost tourism. The aim was to make the country more appealing to tourism and increase the number of tourists coming from Europe and the USA.

Though 60 million tourists visit the country every year, these measures did not bring the desired results because the majority of the visitors, about 60-70% of them come from the neighbouring countries: Hong Kong or Taiwan. However, despite the apparent openness and ambitions, it does not seem like that the country welcomed for foreigners with arms wide open.

Source: travelchinaguide.com, National Bureau of Statistics of China

Source: travelchinaguide.com, National Bureau of Statistics of China

Source: travelchinaguide.com, National Bureau of Statistics of China

Take the matter of visa required for travelling. Citizens of 13 countries only are allowed to enter China without a visa (in contrast, the USA allows 38 countries). Acquiring a visa can be quite tedious and expensive for many countries. Such issues do raise significant obstacles, which pushes tourism below its potential.

A recent study said that visa requirements can decrease the number of tourists by about 70% every year. The numbers perfectly reflect it: in 2015, 2 million Americans visited China from the USA, while Hong Kong boasted with 1.8 million American tourists (even if its GDP and population is 3% and less than 1% of China’s, respectively).

However, quite often, politics intervenes in the country’s tourism, especially when it comes to matters with Taiwan, South Korea and Japan. For example, the Chinese government tightened the travel conditions of South Korea because of an incident involving the installation of a missile defence system. As a response to this, South Koreans, who are essential for China’s tourism, stay away from the country and chose a different travel destination somewhere in Japan instead.

Of course, these matters have macroeconomic impacts too. The study by the Federal Reserve Board said that at the end of 2016, Chinese tourists spent about 190 billion dollars abroad. This is definitely not a balanced situation since tourists coming to China spend about 35 billion dollars every year. In 2016, the official balance of payments statistics showed a 217 billion deficit for tourism, which is 44% of the total surplus of the balance of trade. However, for a country that wants to prevent capital flight, it is a sore point.

All in all, China could do more for its tourism, but they would be politically challenging. However, by simplifying the visa system alone, the benefits would already show.

Original date of Hungarian publication: September 11, 2017