Chapter 6.17: Tourism

Li Yong, Deputy Secretary General, China Association of International Trade

Overview

China has abundant resources for tourism. The industry emerged with the adoption of the country's reform and opening up policy in late 1978. Since then, the industry has been developing rapidly ; it is now a growth industry of a respectable magnitude with a maturing industrial composition and has become one of the fastest -developing industries of the national economy and a new economic growth point in the 21st century. Tourism is a 'smokeless' industry that will not only generate additional sources of revenue, but also create more employment opportunities. As a result, virtually every province , municipality and autonomous region has made tourism a priority industry.

According to National Tourism Administration (CNTA) statistics, China's tourist industry has developed rapidly over the last two decades. International tourist arrivals have been growing at an annual rate of 19 per cent (see Table 6.17.1).

Table 6.17.1: International tourist arrivals between 1978 and 2000

Year	Total (thousands)	Foreigners	Overseas Chinese	Compatriots [*]	Taiwan
1990	2,746.18	1,747.3	91.1	25,623.4	948.0
1991	3,334.98	2,710.1	133.4	30,506.2	946.6
1992	3,811.49	4,006.4	165.1	33,943.4	1,317.8
1993	4,152.69	4,655.9	166.2	36,704.9	1,527.0
1994	4,368.45	5,182.1	115.2	38,387.2	1,390.2
1995	4,638.65	5,886.7	115.8	40,384.0	1,532.3
1996	5,112.75	6,744.3	154.6	44,228.6	1,733.9
1997	5,758.79	7,428.0	99.0	50,060.9	2,117.6
1998	6,347.84	7,107.7	120.7	56,250.0	2,174.6
1999	7,279.56	8,432.3	108.1	64,255.2	2,584.6
2000	8,348.09	10,196.9	76.0	73,208.0	3,108.6
Source: Chinese National Tourism Administration.
[*] The sum of visitors from Hong Kong and Macao.

The statistics from the World Tourism Organization (see Table 6.17.2) differ from those of the Chinese National Tourism Administration, although China ranked fifth in the world's top 15 tourism destinations in 2001. According to these figures, the total number of international tourist arrivals was 33.2 million in 2001, an increase of 6.2 per cent over 2000 and 4.8 per cent of the global total.

Table 6.17.2: International tourist arrivals

Year	International tourist arrivals (million)
1990	10.5
1995	20.0
1998	25.1
1999	27.1
2000	31.2
2001	33.2
Source: 'International Tourist Arrivals by Country of Destination' and 'World's Top 15 Tourism Destinations', World Tourism Organization

The World Tourism Organization also placed China in the fifth position in the world's top 15 tourism earners in 2001. The total international tourism receipts in the year hit a record high of US$17.8 billion, an increase of 9.7 per cent over the previous year and 3.8 per cent of the world's tourism receipts (see Table 6.17.3).

Table 6.17.3: International tourism receipts

Year	Receipts (US$100 million)	Growth (%)
1990	22.18	19.2
1991	28.45	28.3
1992	39.47	38.7
1993	46.83	18.7
1994	73.23	56.4
1995	87.33	19.3
1996	102.00	16.8
1997	120.74	18.4
1998	126.02	4.4
1999	140.99	11.9
2000	162.31	15.1
2001 [*]	178.00
Source: Chinese National Tourism Administration.
[*] 2001 figure is from the World Tourism Organization

At the same time, domestic tourism has also been developing rapidly as a result of improved standards of living and increased household incomes. People take advantage of the two seven-day holidays (International Labour Day on 1 May and the National Day on 1 October) to travel out of their hometowns to other parts of China. In 2000, for example, the number of people travelling for pleasure during the two holiday periods was 46 million and 59.8 million, generating 18.12 billion yuan and 23 billion yuan of revenue for the tourism industry. In 2001, domestic tourism revenue stood at RMB352.24 billion (about US$42.44 billion), causing the aggregate tourism revenue to reach RMB 499.5 billion, which was an increase of 10.5 per cent, 3.2 per cent higher than the GDP growth rate of the same year.

With the increased interaction of China with the outside world both economically and culturally, more people are travelling abroad for both business and pleasure. In recent years , the government has taken a series of measures to streamline the application procedures for private passports, which has facilitated the travels of Chinese people abroad. According to the Chinese National Tourism Administration, the top 10 destinations for Chinese travelling abroad were Hong Kong, Macao, Thailand, Russia, Japan, the Republic of Korea, the United States, Singapore, the Democratic Republic of Korea and Australia.

Figure 6.17.1: Growth of domestic tourists (100 million people)

As can be seen in Table 6.17.4, the total number of trips abroad exceeded 10 million for the first time in 2000. In 2001, the number increased to 12.13 million, up by 15.9 per cent. Business travellers totalled 5.19 million trips, a rise of 7.2 per cent. Journeys for personal reasons increased by 23.3 per cent in 2001, a total of 6.95 million trips.

Table 6.17.4: Outbound travel of Chinese people in 2000

Destination	Number of trips	Percentage growth
Asia
Hong Kong, CN	4,142,191	15.99
Macao, CN	1,644,421	6.04
Taiwan, CN	86,154	2.45
Japan	595,660	10.78
ROK	400,958	29.27
DPRK	194,970	10.81
Mongolia	63,044	24.58
Singapore	262,776	24.50
Philippines	33,647	“4.80
Malaysia	86,696	2.84
Thailand	707,456	“13.08
Indonesia	19,963	31.32
Kazakhstan	44,226	“10.53
Subtotal	8,845,908	13.22
America
USA	395,107	19.15
Canada	100,178	31.03
Subtotal	523,081	21.69
Europe
Germany	112,824	20.52
France	96,485	9.86
Britain	61,129	42.80
Russia	606,102	38.46
Subtotal	1,079,089	31.03
Oceania
Australia	126,852	23.89
New Zealand	18,288	45.25
Subtotal	150,231	26.08
Africa	47,521	15.40
Other	3,625	“33.56
Total	10,649,455	15.35
Source: China National Tourism Administration.

Since overseas tourist destinations opened up for Chinese people in 1989, the government has approved 23 destinations that Chinese people are allowed to visit as tourists. These include Thailand, Malaysia, Singapore, Hong Kong, Macao, the Philippines, Brunei, Burma, Vietnam, Japan, Korea, Laos, Cambodia, Australia, New Zealand, Indonesia, Turkey, Egypt, Malta, Germany, Nepal, South Africa and Greece. There will be no more tourism destination added to this list in the next few years. It is expected that there will be more leisure-oriented foreign tours and travels in the future.

As China's tourism market has thrived, foreign interest in participating in the growth of the market has been strong. Accor, American Express, Preussag and JTB have all been trying to pursue entry in one form or another. Since 1998, when China adopted the Measures on Implementation of Trials on Chinese-Foreign Joint

Venture Travel Agencies, foreign travel agencies have begun to enter China's tourism market. With China's membership of the World Trade Organization, tourism will further open up for foreign participation. According to China's commitments to the WTO in relation to tourism and travel- related businesses, foreign tourism service providers who meet the following conditions are permitted to provide services in the form of joint venture travel agencies and tour operators in the holiday resorts designated by the Chinese government in the cities of Beijing, Shanghai, Guangzhou and Xi'an:

• a travel agency and tour operator mainly engaged in travel business;

• annual worldwide turnover in excess of US$40 million. The registered capital of joint venture travel agency/tour operators shall be no less than RMB4 million. Within three years of China's accession, the registered capital shall be no less than RMB2.5 million. Within three years of accession foreign majority ownership will be permitted. Within six years, solely foreign-owned subsidiaries will be permitted and geographical restrictions will be removed. The business scope of the travel agency/tour operator is defined as:

• travel and hotel accommodation services for foreign travellers which can be made directly with transportation and hotel operators in China covering such operations;

• travel services and hotel accommodation services for domestic travellers which can be made directly with transportation and hotel operators in China covering such operations;

• conducting of tours within China for both domestic and foreign travellers, and

• travellers cheque cashing services within China.

Within six years of accession, there will be no restrictions on the establishment of branches of joint venture travel agency/tour operators and the requirements on registered capital of foreign-invested travel agency/tour operators will be the same as for Chinese companies.

However, joint ventures or solely foreign-owned travel agencies and tour operators are not permitted to engage in the activities of Chinese travelling abroad and to Hong Kong China, Macao China and Chinese Taipei.

At present, 11 joint venture travel agencies have received operating licences, eight of which were approved before China's accession to the WTO. In addition to the opening up of the tourism sector to foreign participation, China has also vowed to open the sector to private entrants, an effort to demonstrate national treatment to the private sector, who complained about super-national treatment of foreign investments and sub-national treatment of the private sector.

The impact of China's WTO accession is generally regarded as positive. One reason for this was that China had already been exposed to and had the chance to become familiar with foreign competition before.

Although there are some concerns about the future of the smaller travel agencies under the pressure of foreign entrants, the opening is certain to take place. Chinese National Tourism Administration stated in late July 2002 that China would take active measures to open up the tourism sector, including:

• Allowing foreign investors to launch joint stock or wholly -owned travel services and break down the geographical barriers so as to attract more big name international travel agencies which are strong in financial capacity, solid in reputation and advanced in management practice;

• Energetically coordinating and standardizing the examination and approval procedures and principles for foreign- funded tourism projects, and improving laws and regulations;

• Improving investment guidance, giving more privileges to the central and western parts of the country in planning joint ventures;

• Deepening the reform of the tourism industry in line with the trend to improve tourism operations and management, upgrade the quality of tourism service and cultivate new growth.