In its pre-corona heyday, China’s global travel value was about the same size as Portugal’s gross domestic product, or just over a trillion dollars. The number of Chinese who traveled outside the mainland in 2019 (about 155 million) represents a slightly larger population than Russia. In the same year, China’s overseas spending on luxury goods surpassed General Electric’s current market capitalization of $90 billion.
The resurgence of this globe-trotting collective giant, whether it resurrects in a frightening way or declines, has significant economic implications. But even more powerful is the possibility of resetting certain views of China that were formed while there were no moving avatars.
As it became clear in December that China would abandon its restrictive pandemic policies sooner than previously expected, markets have understandably grappled with the implications. The removal of PCR testing and quarantine requirements on arrival in China, along with many domestic regulations that have evaporated, has removed a major hurdle for Chinese nationals planning to travel abroad.
As with the expected surge in business travel (and with it investment and trade potential), the most obvious impact of the resumption of large-scale Chinese outbound travel will be the government’s release of stagnant demand for tourism. Very likely. The vast middle class was forced to play hermit against instinct.
This cohort, whose spending on international travel once accounted for 17% of global tourism spending, has not vacationed abroad in three years and has an ever-growing list of things they want to spend their money on. In addition to Hong Kong and Macau, Japan, South Korea and Thailand appear to be the preferred first ports of call. Tokyo pharmacies have long been the target of a spectacular ‘sales explosion’ for Chinese shoppers, but with only a slight resumption of mainland arrivals last month, select cold medicine brands have already sold out. .
Stockbrokers are touting a long list of names, from theme parks and railroads to department stores and eye-drop makers, that are looking to profit from a resurgence in China’s former consumption patterns. Shopping and dining accounted for 57% of Chinese tourist spending before COVID-19, according to a World Tourism Organization study. This is the exact formula that a city like Tokyo appeals to.
Predicting an immediate tourism boom has important caveats. China is hit by a deadly coronavirus wave, airfares (including fuel surcharges) are prohibitively expensive, and the Chinese economy is no longer strapping the middle class into the comforting dynamics it once was. In addition to this, several countries such as the UK, Italy, the US and Japan have decided to reimpose testing requirements on Chinese visitors who have been abandoned due to other arrivals.
However, Citigroup analysts expect a strong recovery in high-end Chinese tourists in the first quarter of 2023, followed by a solid recovery in mass-market travelers in the second quarter.
Citi’s Xiangrong Yu suggests there could be a real rush around May’s five-day Labor Day holiday weekend. All of this could put even more pressure on China’s current account balance as outbound tourist spending returns to pre-pandemic levels. “In addition to tourism and shopping, potential demand such as overseas business trips, overseas investment and hidden capital outflows could also be unlocked,” he said.
But in addition to the direct economic impact, the return of Chinese travelers could have meaningful business impacts and contribute to subtle geopolitical nudges.
Over the past three years of self-isolation, China’s external image has evolved into a bogeyman more quickly than otherwise. Especially in Washington. Many would argue this image, citing the escalating military threat to Taiwan, Xi Jinping’s precedent-breaking insistence on permanent rule, and the apparent closeness to Vladimir Putin on the geopolitical future. is perfectly justified. The tale of decoupling between China and the West began in 2019, when Chinese business leaders, mid-level executives and the shopaholic middle class crisscrossed the globe in tens of millions. It’s probably no coincidence that it feels far more plausible now than it did.
This phase of absence has, to some extent, allowed the formation of a view of China that suppresses the voice of global business – companies operating in China and dependent on its growth, Chinese companies around the world and Either an affiliated company, or a direct company exposed to Chinese spending on the move. China’s resumption of international travel is no panacea for the onset of decoupling and deglobalization, but it may help reinvigorate the voices of those who want a slowdown.
