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

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Hong Kong
CNN

In pre-Covid years, China was the most important source of international travelers in the world. Its 155 million tourists spent over a quarter of a trillion dollars across borders in 2019.

That generosity has plummeted in the last three years, when the country has 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 for the global hotel industry.

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

China averaged about 12 million outbound air passengers per month in 2019, but those numbers have dropped by 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 a month by the summer, boosted by the pent-up wanderlust of wealthy Chinese youth 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 have only been able to roam around the country for the last few years. Was difficult.”

“It’s just that I’ve been stuck inside the country for a long time. I’m really looking forward to restrictions being lifted so I can go somewhere to have fun! ”said the 30-year-old, adding that she wanted to visit Japan and Europe more.

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

As China announced last month, it would no longer subject arriving travelers to quarantine from 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 runs from Jan. 21 to 27 this year, are up 540% year-on-year, according to data from the Chinese travel website. Average spend per booking increased by 32%.

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

“The rapid accumulation 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 likely led to restrictions on household spending.

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

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

“We estimate that Hong Kong, Thailand, Vietnam and Singapore would benefit most if imports of travel services from China were to return to 2019 levels,” analysts at Goldman Sachs 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% rise in its GDP as exports and revenue from the tourism increases, they said. Thailand’s GDP could be boosted by 2.9%, while Singapore would see a 1.2% increase.

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

Hong Kong has particularly suffered from the closure of its border with mainland China. The city’s main tourism and real estate industries were hit hard. The financial center expects GDP to have contracted by 3.2% in 2022.

The city government announced Thursday that up to 60,000 people would be allowed to cross the border daily. each direction, starting on Sunday.

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

“This is one of the opportunities to speed up the economic recovery,” the Thai health minister said this week.

New Zealand has also waived testing requirements for Chinese visitors, who 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 required 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 authorities in some countries, said Saxon, who leads McKinsey’s travel practice in Asia.

Airlines and airports have already criticized 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 and Airlines for Europe, issued a joint statement on Thursday, calling the EU’s action “regrettable” and ” an instinctive reaction.

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 testing passengers.

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

Lu, from Beijing, said he is still considering his travel plans, taking into account the various test requirements and the high price of the flight.

“Restrictions are normal because everyone wants to protect people in their own country,” she said. “I will wait and see if some policies are relaxed.”

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

“Time is short and I need to leave in about 10 days. People can choose some places and countries that accept visas to travel,” she said, adding that she plans to learn scuba diving and wants to buy cosmetics. Your total travel budget may exceed 10,000 yuan ($1,460).

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

“Generally, individuals are pragmatic and countries will welcome Chinese tourists due to their purchasing power,” he said, adding that countries can remove restrictions quickly when the Covid situation improves in China.

“It will take time for international tourism to kick in, but it will come back quickly when it does.”

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