February 10, 2019
South China Morning Post
Chinese tourists are on the march, and bringing change wherever they go. Businesses everywhere must ensure they don’t miss the boat
Matthew Doull, Managing Director, BDA Hong Kong
- Matthew Doull says travel is a powerful foreign policy tool for China
- Growing numbers of outbound tourists will reduce China’s current account surplus, and bring changes in business and technology everywhere they land
Lunar New Year is said to be the largest annual human migration on the planet. This year, Chinese people returning home to their families, or travelling, are expected to take a total of 2.99 billion trips, up 0.6 per cent from last year.
Such a tide of people will inevitably bring change in all the places they go to, along all the routes they take, and across areas from technology to trade. As such, travel is a powerful foreign policy tool for China.
The annual holiday exodus is a small part of a bigger trend. The Chinese took 5 billion domestic trips in 2017, and 71.3 million trips abroad in the first half of 2018, yet only around 6 per cent of them hold passports. So there is huge scope for the number of outbound Chinese tourists to grow, and their impact to increase.
To start with, there is the money they spend. In its long history, China has almost always had a bigger domestic market than any other economy in the world. And over the past half a century, its transformation into a consumer market and the world’s factory has coincided with insatiable Western demand for Chinese products, leading to a colossal trade imbalance and the accumulation of dollars in Chinese hands.
In 2017, 130 million Chinese tourists spent US$115 billion overseas, according to official data, or about US$900 each.
Chinese outbound tourism is already reducing China’s current account surplus. It could take only a couple of years, maybe more, for tourism to balance out Chinese trade – a far more elegant mechanism than tariffs.
Combine this flow of capital with the fact that the travellers of the next 20 years will be tech-savvy, and we will witness a parallel export of the technologies that help enable this tourist boom.
In the first 10 months of 2018, China’s mobile payments, via apps like Alibaba’s Alipay and Tencent’s WeChat Pay, hit US$12.8 trillion. As they travel, Chinese people will want to use the virtual wallets overseas, so we can expect increasing global acceptance. China’s UnionPay card is already accepted in 170 countries; WeChat Pay and Alipay are following close behind – they are now accepted everywhere from taxis in Singapore to outlet malls in upstate New York.
Currently, the destinations most popular with Chinese tourists are other Asian countries: in 2017, Chinese accounted for 36 per cent of all arrivals in the Asia-Pacific. The Pacific Asia Tourism Association expects 60 million holidaymakers from China in 2020. The United States is a rare non-Asian destination in Chinese tourists’ top 10.
The Chinese tourist dollar is providing regional industries with opportunities to fund and develop new products and services. Chinese venture capitalists have been investing in travel tech start-ups, but traditional players are responding too: in December 2018, four major Asian travel wholesalers formed an alliance to share their hotel supply.
China’s travel boom is also driven by the way social media is shaping human behaviour and global culture. The trend now is away from buying things and towards buying experiences – and travel is perhaps the ultimate experiential consumption. In the age of Instagram and WeChat, travel can instantaneously convey status in the way that carrying the right handbag or wearing the right shoes used to.
The implications for Asian businesses are clear: while other industries from automobiles and telecommunications may suffer during an economic slowdown amid the uncertainty of the trade war, travel provides robust growth prospects. That means the industries which cater to tourists should not miss this boat.
Outbound tourism is a significant foreign policy lever for China. And, as greater numbers of affluent Chinese explore the world, with their preferences and technologies in tow, they will also remake the world in China’s image.
BDA Partners is the global investment banking advisor for Asia. We are a premium provider of Asia-related advice to sophisticated clients globally, with over 20 years’ experience advising on cross-border M&A, capital raising, and financial restructuring. We provide global reach with our teams in New York and London, and true regional depth through our seven Asian offices in Tokyo, Seoul, Shanghai, Hong Kong, Ho Chi Minh City, Singapore and Mumbai. BDA has deep expertise in the Chemicals, Consumer & Retail, Health, Industrials, Services and Technology sectors. We work relentlessly to earn our clients’ trust by delivering insightful advice and outstanding outcomes.
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