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Economy

Welcome to the world, Chinese tourists

It's that time of the year again. As the Lunar New Year approaches, Chinese are packing their bags to visit friends and family across the vast country. This year, during China's peak travel season, which straddles the holidays and lasts about 40 days, officials estimate that some 3.6 billion trips will be made. That's almost three per person -- the equivalent of half of the world on the move. 

     Most will travel by road, huddled in buses and trucks, or perhaps in newly purchased cars. Despite the country's huge investment in railways, trains will only carry about 250 million passengers during this period, with some 40 million traveling by plane. All this puts China's infrastructure spending spree in perspective: The government expects 200 million more trips to be made this year compared with 2013. That increase is equivalent to twice the population of the Philippines, or 80% of existing passenger transport capacity of China's rail network.

     These numbers seem improbably large -- and are undoubtedly flattered by the inclusion of short trips to suburbs and neighboring villages -- but there is no doubt that China's tourism industry is booming. The National Tourism Administration revealed last week that domestic tourists made 3.25 billion trips in 2013, up from 2.9 billion the previous year. (These are of the proper holiday variety rather than a quick stop home during the Lunar New Year). That's an annual increase of 350 million, more than the population of the United States.

     A similar trend, though not quite reaching those dizzying numbers, is under way in foreign travel. The latest figures show that more than 97 million Chinese traveled abroad last year, up from 83 million in 2012. This makes Chinese tourists the biggest spenders on travel globally, eclipsing Germans and Americans, the next most avid travelers, by some 25%. President Xi Jinping noted recently in a speech that, in five years, the number of outbound travelers will likely reach 400 million.

Getting to know you

This is head-spinning stuff. What should we make of this Chinese yearning to see the world? Apart from busier airports and overbooked hotels, there are other implications. First, greater foreign travel fosters understanding between China and its neighbors. This is a two-way street. But, to the extent that visits, exchanges and travel experiences can help shape perceptions, growing intraregional tourism should make a helpful contribution to regional stability.

     Europe's experience in this regard is instructive. Following World War II, rapprochement between the continent's peoples did not come naturally. New institutions, such as the European Economic Community, played crucial roles. So did government-sponsored cultural and study exchanges. But equally important were the millions of personal experiences of ordinary Europeans who took to the road and explored neighboring countries in far greater numbers than ever before, often discovering that beneath presumed disparities lay foundations of shared commonality.

     Second, Chinese tourism provides an avenue for neighboring economies to benefit from China's growing prosperity. While China's imports of goods have grown over the years, the economy remains remarkably self-sufficient in manufactured products, limiting the extent to which other countries can benefit from its growth. A rise in Chinese tourism would help to balance this.

     Take Thailand. There, despite stagnating visits from Europe and North America, a surge from China propelled tourist arrivals to a record high last year. The share of tourism in national GDP has continued to climb, and the inflow of dollars and yuan has provided a welcome cushion as the trade balance has pushed further into deficit. In the Philippines, too, Chinese tourists are now the fourth-largest group of visitors, up more than 60% over the previous year, according to the latest numbers. The story is similar for other members of the Association of Southeast Asian Nations, as well as South Korea, Japan and countries farther afield.

Just the beginning

It is true that, so far, most Chinese tourists travel in groups, shepherded through shopping malls with few opportunities to interact with locals. This limits the experience and the economic benefits that growing tourism can provide. But this is rapidly changing. The Chinese are increasingly venturing out on their own. Even organized tours are far less scripted after a new law strengthened Beijing's oversight of the industry last year and allowed foreign operators to offer services in China directly. Greater individual travel by Chinese tourists will bring even greater economic benefits to host countries.

     And all this may be only the beginning. Compared with the billions of trips already taken domestically each year, China's foreign travel has barely scratched the surface. Already providing the largest share of international tourists, China's outbound travelers look ready to set off even more in the coming years. If you ever wonder why it's getting so crammed on those planes, this is why. But it's not at all a bad thing, for peace as well as for prosperity.

Frederic Neumann is co-head of Asian economic research at HSBC.

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