13 Sep China’s Poor Economic Data Could Put Dent in Chinese Arrivals Target
LIKE many other nations, Malaysia was looking forward to the reopening of China’s borders post-Covid-19 pandemic for that much-needed boost to tourism, given that the republic is the world’s biggest source market. The United Nations World Tourism Organization (UNWTO) even described the reopening of China’s borders as representing “the moment the world has been waiting for”.
In 2019, prior to the pandemic, China tourists collectively spent US$255 billion (RM1.2 trillion) on international travel. However, UNWTO said the pandemic cost destinations worldwide a combined US$270 billion in Chinese outbound tourist spending in 2020 and 2021.
The reopening of the country’s borders earlier this year did contribute to an increase in Chinese arrivals in Malaysia. Based on available Tourism Malaysia ﬁgures, in the ﬁrst ﬁve months of the year, Malaysia welcomed 403,121 Chinese tourists, up 18-fold from the 21,613 recorded in the previous corresponding period. But, the ﬁgure is much lower than 2019’s 1.34 million over the same period.
China is an important tourism market for Malaysia. In 2019, it was Malaysia’s third-largest tourist arrival nation after Singapore and Indonesia, with 3.11 million tourists visiting the country.
And the tourists were the second-highest spenders, contributing RM15.32 billion or 17.8% of total tourism revenue of RM86.1 billion that year. They stayed for an average of 6.4 days and their per capita expenditure was RM4,921 in the hotel, retail and travel segments.
In anticipation of a jump in arrivals this year, Malaysia set a goal in January to bring infive million China tourists. To achieve this, there would need to be an average of416,667 China tourists every month in the remaining seven months from June toDecember. But, it appears that we are nowhere close to the target.
“Unfortunately, not as many Chinese tourists are coming in now,” MalaysianAssociation of Hotels president Datin Christina Toh tells The Edge. The trend, she adds, shows that these tourists are no longer coming in large groups. Toh attributes the drop in arrivals to a combination of factors, including China’s aggressive domestic tourism promotion, slower passport processing post-Covid-19, higher fares for flights and the slowing economy. These factors are making the China arrival target set byMalaysia a tough goal to achieve, she says.
Accordingly, hotel operators have begun to broaden their target market. “We are looking at alternative markets in Asean (to fill the gap),” Toh points out.
Interestingly, it appears there are many other reasons why the Chinese are not heading overseas. Three weeks ago, Bloomberg, quoting an April survey by DragonTail International, said that the main factor holding Chinese travellers back from overseas trips is concern for their safety in other countries, as they are fearful of getting an unfriendly reception. The survey also cited health concerns, difficulty in getting documents such as visas and the high cost. Fifty-eight per cent of those surveyed said they would either definitely not leave mainland China in 2023 or were unsure about going abroad.
Bumps ahead as Chinese economy sputters
With China recently delivering a slew of disappointing economic data, signalling a slowdown in its economy, could things get worse?
The Chinese authorities appear concerned. Three weeks ago, China’s central bank unexpectedly cut its key interest rate by the most since 2020 to help boost the economy. The People’s Bank of China lowered the rate on its one-term loans or medium-term lending facility (MLF) by 15 basis points to 2.5%. In June, the MLF rate had been cut by 10 basis points.
The country’s top leaders were reported to have said that the economy faces “new difficulties and challenges” as well as “hidden dangers in key areas”.
China also reported that it would suspend the release of the youth unemployment rate, citing the need to improve and optimise its labour force survey. In June, youth unemployment hit a record 21.3%, which indicates that one in ﬁve youth was unemployed. Overall unemployment inched up to 5.3% in July compared to 5.2% in June.
At the same time, retail sales have softened, growing 2.5% year on year in July, from 3.1% in June. Industrial production expanded 3.7% in July from a year ago, but it was lower compared to June’s 4.4% growth.
“While there was much hope at the start of the year that a resurgence of outbound tourists from China to Asean would lift retail trade, hospitality and domestic consumption, thus far, the constraint on outbound ﬂights has kept Chinese tourists largely at home,” Chris Eng, chief strategy oﬃcer at Etiqa Insurance and Takaful, tells The Edge.
“As such, while there remains hope that an expanding ﬂight capacity towards end-2023 will lift the numbers of Chinese tourists back into Asean, current issues
(disappointing set of data) in China mean this hope may not materialise,” he cautions. “While there were the ﬂight capacity issues earlier and a reluctance to reinstate ﬂight capacity for fear of capital outﬂows, with the need to potentially cut rates further, those fears will also be there.” Nevertheless, Eng does not expect the new developments to “sink Asean tourism plays much more as the markets had already discounted China’s tourism boost for Asean about a month ago”.
Earlier optimism over China tourists has not only ﬁzzled out in Malaysia, but also in Singapore and Thailand, he adds.
Indeed, the Thais had pinned even higher hopes on China and set an ambitious target of achieving seven to 10 million tourists, compared to 11 million in 2019. In June, it was reported that Thailand is likely to miss its 2023 target of 30 million foreign tourists because of fewer-than-expected visitors from China. RHB Bank senior economist Barnabas Gan projected arrivals to be slightly below ﬁve million, instead of the seven million target because China’s economy is projected to ease in the second half of 2023.
Meanwhile, a recent report by Inside Asian Gaming said that in July, China had reclaimed the top spot as Singapore’s leading source tourism market with 655,520 arrivals. As such, analysts have suggested that Marina Bay Sands and Resorts World Sentosa are set to beneﬁt from the return of Chinese travellers.
Commenting on this development, Eng says, “They are slowly coming back, but then this economic slowdown will pare it back.”
Target of 18 million arrivals within reach
Malaysian Inbound Tourism Association (MITA) president Uzaidi Udanis acknowledges that the decline in China tourist numbers has had an impact on the country but remains hopeful the situation will improve. MITA — which primarily focused on inbound tourists from China prior to the pandemic— is looking at other markets to replace the Chinese.
“Not only Malaysia has been aﬀected [by the drop]. The rest of the world is disappointed too,” Uzaidi says, attributing the lower numbers to issues such as passport renewal and reduced ﬂight capacity.
“But we have been seeing an improvement over the past two months,” he observes. “They are not coming in big numbers or by the busloads but smaller groups in vans and bas persiaran (tour buses).
“China has its own economic model. Even though there is a slowdown, it has a huge market made up of the very rich who can aﬀord to travel even in a slowdown. But the question is: Can Malaysia attract this group? Not only are Thailand and Indonesia trying to attract the aﬄuent Chinese, but so are the Arab countries. We need new and fresh activities to attract them,” he stresses.
In the interim, Uzaidi says member travel agents are targeting Russian tourists. “We have missed the summer crowd, but hope to target the winter groups who usually travel from January to March.”
The Malaysian Association of Convention and Exhibition Organisers and Suppliers (Maceos) president Francis Teo says that China’s economy has been reliant on its domestic market during the long lockdown period, which is not sustainable.
As the factory of the world, China needs to increase trade with the international market, he says.
“The business event industry does not rely on China leisure visitors but we have seen an inﬂux of Chinese exhibitors participating in local trade exhibitions since their borders reopened early this year. The attention on Malaysia is due to the lower cost of event participation, ease of communication and ﬂexible trade agreements compared with other Asean countries,” he adds.
It is worth noting that even as we expect fewer Chinese tourists this year, Malaysia believes that it will be able to surpass the full-year arrival target of 16.1 million.
Tourism Malaysia’s director-general Datuk Dr Ammar Abd Ghapar has said that the country is likely to hit 18 million visitors this year. With total arrivals in the ﬁrst ﬁve months of the year at 7.48 million or an average of 1.496 million each month, should Malaysia manage to match the ﬁrst ﬁve months’ average for the remainder of the year, it could well touch 18 million in arrivals by year end.
Source : The Edge