In its pre-Covid prime, the total value of Chinese worldwide travel was roughly the size of Portugal’s gross domestic product, or just over a quarter of a trillion dollars. The number of Chinese who made trips outside the mainland in 2019 — some 155mn people — represented a population slightly larger than Russia’s. In that same year, Chinese overseas spending on luxury goods was larger than the current $90bn market capitalisation of General Electric.
The resurrected form of this collective globetrotting titan, whether it comes back formidable or faltering, will be economically significant either way. More powerful, though, is its potential to reset certain views of China that have formed during the absence of its travelling avatars.
Since it became clear in December that China would jettison its restrictive pandemic policies more quickly than previously expected, markets have naturally been wrestling with the implications. Along with the many domestic rules that have evaporated — to striking and immediate effect — the lifting of the requirement for a PCR test and quarantine on arrival in China removes a huge obstacle for Chinese planning any travel abroad.
As well as an expected spike in business trips (and with them the greater possibility of investment and dealmaking), the clearest effect of the resumption of large-scale Chinese travel abroad is likely to be a release of pent-up demand for tourism by a vast middle class forced against its instincts to play the hermit.
This cohort, whose overseas travel spending once accounted for 17 per cent of the global tourism outlay, has not taken a foreign holiday for three years, and has a growing list of things it wants to spend its money on. In addition to Hong Kong and Macau, Japan, South Korea and Thailand appear the favoured first ports of call. Pharmacies in Tokyo, long the target of spectacular “sales explosion” Chinese shopping sprees, are already sold out of a selection of cold medicine brands after just a modest resumption of arrivals from the mainland since last month.
Stockbrokers are touting long lists of names — from theme parks and railways to department stores and makers of eyedrops — that stand to gain from the revival of China’s former spending patterns. Research by the World Tourism Organization showed that 57 per cent of pre-Covid Chinese tourist spending went on shopping and eating — the precise formula with which cities like Tokyo appeal.
There are significant caveats around forecasts of an instant tourism boom. China is suffering a deadly Covid wave, flights (including fuel surcharges) are punishingly expensive, and the Chinese economy is not draping the middle class in the sort of feel-good dynamics it once did. Added to that are the decisions of some countries — the UK, Italy, US and Japan prominent among them — to reimpose testing requirements on Chinese visitors that have been abandoned for other arrivals.
But analysts at Citigroup are among those whose assumption is now a solid recovery in high-end Chinese tourism in the first quarter of 2023, and by the mass market travellers in the second quarter.
The real rush, suggests Citi’s Xiangrong Yu, could come around the five-day Labour Day holidays in May. All of this could put greater pressure on China’s current account, if outbound tourist spending snaps back towards its pre-pandemic levels. “Besides sightseeing and shopping, the pent-up demand for outbound business travel, overseas investments and hidden capital outflows could also be unleashed,” he said.
But on top of the direct financial impact, the return of Chinese travellers could have a meaningful effect on businesses and contribute to a subtle geopolitical nudge: that of re-pluralising the outside world’s view of China.
In its self-sequestered state of the past three years, China’s external image has progressed more swiftly to bogeyman than it might otherwise have done: in Washington, particularly so. Many will argue — citing, among other signs, the intensified military threat to Taiwan, Xi Jinping’s precedent-breaking claim on permanent rule and his apparent proximity to Vladimir Putin on the future of geopolitics — that this image is fully justified. It is perhaps no coincidence that the China-West decoupling narrative feels much more plausible now than it did in 2019 when Chinese business leaders, mid-level executives and shopaholic middle classes were criss-crossing the planet in their tens of millions.
This phase of absence has, to some extent, allowed a view of China to form that has suppressed the voices of global business — either those operating in China and dependent on its growth, those in partnership with Chinese companies around the world, or those directly exposed to the spending of Chinese on the move. The resumption of Chinese overseas travel is no panacea to the onset of decoupling and deglobalisation, but it may serve to reinvigorate the voices of those who wish it to slow.
leo.lewis@ft.com
Source: Economy - ft.com
