Tourism pivotal force driving demand recovery

After being pummeled by the COVID-19 pandemic a few years back, China's economy is showing signs of recovery. The biggest factor driving it is domestic demand. Projections suggest the uptrend will continue, pointing to a steadying of consumer confidence after the contagion-related slump.

While not all sectors are booming, a big driver of the recovery has been the robust performance of tourism, a large contributor to the CPI, the main barometer of inflation.

Chinese consumers are optimistic about the economic recovery, according to a report by McKinsey & Co, with projected tourism-related expenditures expected to remain robust. Surveys reveal that 87 percent of respondents plan to increase or maintain their tourism spending, particularly in the areas of culture, entertainment and shopping — categories of consumption that are highly flexible and full of potential for economic growth.

Data from the first quarter supports this narrative. The number of domestic tourists increased 16.7 percent over the previous year, and tourism revenue climbed 17 percent.

As someone who has worked and lived in China since 2015, I see the potential of the Chinese tourism sector. From my point of view, its growth will continue long term and can continue to become a driver of China's domestic demand.

Tourism, like much of the economy, suffered a major setback during the COVID-19 slump between 2020 and 2023. The pandemic dealt a severe blow to China's tourism industry. It disrupted travel and caused substantial economic losses.

The number of domestic tourist trips in 2020 plummeted to approximately 2.88 billion, a sharp decline from 6.01 billion in 2019. International tourist arrivals also dropped drastically, with an over 80 percent decrease compared to pre-COVID levels.

In 2020, for example, China's tourism revenue fell dramatically to about 2.23 trillion yuan ($314.8 billion), a significant reduction from the peak of 6.63 trillion yuan in 2019.

The recovery in tourism has had a substantial positive impact on consumer confidence and economic support. The China Tourism Academy said domestic tourism is projected to continue its growth trajectory during the remainder of 2024, with domestic visits estimated to exceed 6 billion and tourism-related revenue exceed 6 trillion yuan.

Moving forward

The tourism sector, as a pillar of the tertiary industry, has an immediate and tangible impact on invigorating demand. "The China Domestic Tourism Development Report (2023-24)" indicated a resurgence in tourism development plans. During the major holidays of 2023, both the number of tourists and tourism-related revenue increased compared to the previous year.

During the Mid-Autumn Festival and National Day combined holidays, both tourist numbers and revenue recovered to pre-COVID levels, registering a modest 4.1 percent rise in tourist numbers and a 1.5 percent increase in revenue compared to 2019.

Beyond its direct influence, the tourism sector has important indirect effects, particularly in the industrial chain. It is estimated that every yuan earned by the tourism industry stimulates an additional 4.3 yuan in related industries. As tourism demand continues to increase and upgrade, its proportion in household consumption expenditure also rises, solidifying tourism's role in promoting consumption and expanding demand.

With the transformation and development of the silver economy and the Generation Z economy, the wealth that tourism can generate will be even greater.

As the world reopens and economies seek to rebound from the pandemic's impact, China is taking steps to invigorate its tourism sector, both as a means of domestic demand revival and as a catalyst for structural transformation within the sector. The government has introduced a series of policies designed to benefit the tourism market from a long-term perspective — a strategic commitment that recognizes the industry as a key force for economic recovery.

Beginning Dec 1, 2023, a unilateral visa exemption policy was implemented for citizens of six countries: France, Germany, Italy, the Netherlands, Spain and Malaysia. The policy allows visa-free entry for business, tourism and family visits for up to 15 days. It marks a positive signal of China's further opening-up to the world and should facilitate economic, political and cultural exchanges.

Additional measures have been introduced to enhance the convenience of visa services, including the temporary exemption from fingerprint collection, streamlined visa application forms and the cancellation of visa application appointments. These initiatives are not only more convenient for foreigners coming to China, but also demonstrate a proactive stance of the Chinese government in promoting tourism and economic exchanges. The expansion of port visa application conditions to include nondiplomatic and nonofficial activities for foreign personnel in urgent need of entering China covers the most of those with immediate needs. This can further attract foreign tourists and business people and stimulate more development of the tourism sector.

Boosting tourism confidence

Moving down from the national level, local governments are looking to take part in renewed tourism growth. In anticipation of peak tourism season, numerous Chinese cities have launched innovative measures to attract tourists to increase the vitality of the cultural and tourism market and boost consumption potential.

In this "tourist competition", local governments have not only promoted consumption through the issuance of cultural and tourism coupons, but have also actively promoted local characteristic cultural and tourism efforts and improved their brand image.

These measures showcase China's determination to revitalize its tourism sector and set it up to play a significant role in the country's economic recovery and long-term development strategy.

With China's massive population, domestic demand could be sufficient to provide an economic resurgence. However, tourism planners are aiming to increase both domestic and international tourism, showing off China's history and culture to the world and not just to its own citizens. If they succeed, the resurgence of China's tourism sector would become a shining example of the country's economic resilience and strategic moves to invigorate domestic demand and stimulate new international markets.

With robust growth in domestic tourism and a series of government initiatives aimed at boosting the sector, the tourism market has emerged from its COVID-19 malaise and should continue as a pivotal force in domestic demand recovery. The government's visa policies and the distribution of tourism consumption vouchers are indicative of a proactive approach to stimulate the market and foster consumer confidence. These measures, coupled with the inherent capacity of the tourism industry to drive employment and economic growth, position it as a sustainable engine for the country's long-term development.

The sustainability of this growth hinges on the industry's ability to innovate and adapt to evolving consumer preferences and global shifts. As China continues to open up and integrate into the global economy, the tourism sector's role in enhancing the nation's economic vitality and international influence will grow.

The vitality of China's tourism market is not just a reflection of its current economic rebound, but also may be a harbinger of the country's potential to shape its economic trajectory for many years.

The writer is former infographics artist at the Washington Post.

The views don't necessarily reflect those of China Daily.