Commentary / World

Chinese tourists won't be weapons for much longer

by Adam Minter

Bloomberg

This was supposed to be the China-New Zealand Year of Tourism, but the celebration appears to be off. An influential Chinese state-owned newspaper recently reported that Chinese tourists were having second thoughts about traveling to New Zealand thanks to suggestions that its government might bar Huawei Technologies Co. from the country’s next-generation wireless networks. (Wellington now says the door isn’t closed to the company.) A senior official at China CYTS Tours Holding Co. Ltd., a powerful state-owned Chinese tour operator, summarized the decision-making process: “How warmly a country treats tourists could also affect Chinese citizens’ choices of travel destinations.”

This is no idle threat. As countries from Palau to South Korea have learned the hard way, the Chinese government isn’t afraid to divert its tourists and their thick pocketbooks whenever it wants to make a political point. The economic consequences can be devastating for tourist-dependent economies. The good news for New Zealand and other scenic countries is that this not-so-secret weapon might not be so much of a weapon much longer.

The modern Chinese overseas tourist was born in the early 1980s when the Chinese government began loosening decades of travel restrictions. Destinations were initially limited to territories with large ethnic Chinese populations, such as Hong Kong and Southeast Asia. The purpose was expressly political: The Chinese government wanted to re-establish bonds with these long-neglected communities.

As incomes rose in the mid-1990s, demand for overseas travel grew as well and the government was forced to loosen restrictions. In order to maintain some semblance of control, it established the Approved Destination System, licensing Chinese agencies to organize group tours to listed countries (they’re also expected to take responsibility if those tourists don’t return to China). In return, approved countries were licensed to market themselves in China as attractive destinations.

The ADS system has been remarkably effective at helping a country of inexperienced travelers explore the world. In the space of a generation, China has become the world’s largest market for outbound tourism, with citizens taking nearly 150 million trips abroad in 2018. The system has also worked out well for destination countries. According to one study, ADS status boosts Chinese arrivals to a country by more than 50 percent over the initial three-year period. For a tourism-dependent economy such as New Zealand, where 6 percent of GDP is derived directly from travel and tourism and Chinese are the second-largest group of inbound tourists (after Australians), that boost can be economically essential.

That fact hasn’t been lost on the Chinese government. For example, in 2001 it granted Turkey ADS status in exchange for allowing a decommissioned Chinese-owned aircraft carrier passage through its waterways. Conversely, in 2017 Beijing suspended authorized group tours to South Korea after Seoul agreed to deploy a U.S. missile shield. The South Korean government estimates that the suspension cost its tourism industry almost $7 billion in 2017 alone. Last year, the tiny South Pacific island nation of Palau saw its all-important tourist economy collapse in the wake of a ban on Chinese group tours because it wouldn’t agree to shift its diplomatic recognition of Taiwan to the mainland. Previously, Chinese accounted for roughly 45 percent of Palau’s tourists.

Yet, as Chinese tourists become wealthier, more sophisticated and more confident, the prospects for this economic weapon are decidedly dim. The longtime preference for government-approved group tours is naturally eroding in favor of independent travel that is not — for now — subject to government restrictions. In 2013, 37 percent of all Chinese outbound travel was independent; during the first half of 2018, it was 50 percent (as booked through Ctrip.com International Ltd., China’s largest tour agency). And in some regions, it was even greater. In Australia, independent travelers comprise 58 percent of Chinese tourists, up from 42 percent in 2014; in the United States, they accounted for 78 percent of Chinese tourists during the second quarter of 2018.

Of course, some Chinese travelers may decide on their own not to spend their yuan on certain countries, even without government coercion. But this younger, richer and more educated demographic has proven itself to be more independent in its consumer choices than prior generations. Millions of independent Chinese tourists continued to visit South Korea after the politically charged ADS bans and they returned more quickly than groups after the strictures were lifted. Nor would an official appeal to patriotism necessarily work: Chinese consumers have increasingly resisted calls to boycott products associated with political adversaries, as evidenced by the well-publicized and failed effort to boycott high-end jacket maker Canada Goose Holdings Inc. for Canada’s role in arresting a top Huawei executive.

New Zealand recognized this shift long ago. Even before the recent Chinese threats, its government-funded tourism agency had begun to refocus its China marketing efforts on well-heeled independent travelers. The best way to resist China’s government may be to go around it.

Adam Minter is a Bloomberg Opinion columnist. He is the author of “Junkyard Planet: Travels in the Billion-Dollar Trash Trade.”

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