Although travel flows to China in the third quarter were only 45% of the same period in 2019, before the pandemic, retailers are expected to see more tourism revenue by next year as flights increase, Beijing-based investment bank China International Capital Corporation (CICC) said. Monday.
“The number of inbound tourists and consumption have gradually recovered in 2023,” the partially state-owned company said via WeChat.
The CICC forecasts an “improvement in economic activities” and a “resumption of international flights” next year, leading to possible growth in domestic retail sales of 0.2 percentage points by 2024 and one to two percentage points more for exports.
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The return potential is quite large
Steven Zhao, China Highlights
International tourism revenue for the July-September 2023 quarter recovered to around 59 percent of revenue from the same period in 2019, the company said.
“The slow recovery of tourists and consumption is partly linked to the slow recovery of the economy, and may also be linked to the number of international flights,” the bank said.
Visa obstacles and – for some businessmen – fears of legal problems in China have curbed travel this year despite borders reopening in January after three years of strict anti-pandemic controls.
The absence of international visitors has slowed the recovery of the multibillion-yuan service sector linked to domestic travel.
President Xi Jinping and US President Joe Biden agreed last week to increase direct flights between their two countries. The commitment came as the two presidents met on the sidelines of the Asia-Pacific Economic Cooperation Leaders’ Summit, held in San Francisco.
Sino-US flights have seen a gradual increase, with around 70 flights per week now, compared to more than 300 in 2019, the CICC estimated. The United States authorized the number of weekly flights by Chinese airlines is expected to reach 24 last month, up from 18 previously.
The return of direct flights is expected to lower airfares and attract more travelers from the United States to China, said Steven Zhao, CEO of Guilin-based online travel agency China Highlights.
Local retailers expected to benefit include hotels, the food and beverage sector and mainstream stores located on tourist routes, he said. “The potential for a comeback is quite significant,” Zhao said.
The CICC said that among 2019 arrivals, 40 percent were tourists or family visits, and the rest growth was linked to economic activities.
Inbound tourists will generate 380 billion yuan next year, or 1.6 percentage points of economic growth, according to the CICC. International tourism revenue reached 904.9 billion yuan ($125.5 billion) in 2019.
Before the outbreak, inbound tourism accounted for more than 5 percent of China’s exports and about 0.5 percent of overall retail sales, the CICC said. Tourism can be linked to exports because it brings foreign exchange and takes place in the international market.
Analysts, however, cautioned against hoping for a rapid resumption of flights from the United States. They cite difficult relations between China and the United States and uncertainty over long-term passenger demand.
US carrier United Airlines will operate 42 flights a week by February, said John Grant, senior analyst at British aviation intelligence firm OAG. Chinese carriers are also adding flights, he added, but United’s competitors are “much more cautious.”
United Airlines did not respond to a request for comment.
“(The Xi-Biden engagement) is a grand gesture that offers more to Chinese carriers than to U.S. airlines that have not demonstrated an urgent need to return to the Chinese market,” Grant said.
More information from the South China Morning Post: