For many Chinese, travel has become a new way of searching for new experiences and achieving happiness. Not only are they travelling abroad in greater numbers, they are also spending more than other nationalities. Although many remain enthusiastic shoppers, the next generation of Chinese globetrotters is reshaping global tourism like never before.
From shopping and sightseeing to medical care and new experiences, the next generation of China’s growing middle classes are reshaping global tourism.
Since China opened up to the world in 1978, its citizens have been travelling beyond its borders in ever greater numbers. What began with trickles of tourists to only a few neighbouring countries for approved family visits in the 1980s has transformed into a new generation of Chinese globetrotters. The China Outbound Tourism Research Institute estimates that Chinese residents made a total of 163 million trips abroad in 2018.
But not only are they travelling abroad, they are also spending abroad. In recent years, Chinese tourists have overtaken American and German travellers and now claim the first position on the list of the world’s largest spenders. The United Nations World Tourism Organisation estimates that the Chinese spent roughly USD 277 billion overseas in 2018. This is practically twice as much as the Americans’ extravagant USD 144 billion. Overseas Chinese spending is expected to reach USD 462 billion in 2025, which will be nearly equivalent to Belgium’s nominal GDP, or 70% of Swiss GDP.
Although the pace of growth of Chinese tourism has somewhat moderated over the past two years as a result of slower economic growth, a weakened RMB against the USD, and the ongoing Sino-American trade conflict, it continues to be an important driver of global tourism. Not only do the Chinese have greater desire to travel, they also have more disposable income due to a growing middle class. Chinese outbound tourism is also further supported by fewer visa restrictions for Chinese globetrotters and the presence of over 200 airports in the country.
It is important to note, however, that less than ten per cent of Chinese citizens own a passport. This astounding number signifies that the global tourism industry may showcase potential for growth. Given the anticipated further rise of the Chinese middle class, what may happen to the global tourism industry if another five per cent of the Chinese population applies for a passport?
Less than 10 percent of Chinese citizens own a passport.
In terms of destinations, the majority of Mainland Chinese still tend to visit neighbouring Asian countries. As a matter of fact, nearly two-thirds of those travelling abroad visit other Asian destinations, notably Hong Kong and Macau, Thailand, Japan, South Korea and Singapore. Western European countries such as France, Italy, and Switzerland, are also becoming progressively appealing. There are signs that Chinese travellers are beginning to venture into less popular areas, such as Africa and the Antarctic, as well.
Shopping remains top priority
Chinese travellers remain enthusiastic shoppers regardless of whether they spend their money at home or in foreign destinations. For many Chinese, shopping is inseparable from their overseas travel experience. This can be attributed to the availability of cheaper, better quality goods abroad, the lack of the desired products in their home country, or simply the joy of purchasing something in a foreign country. Among the purchases, skincare and beauty products, luxury goods, clothing and shoes are most appreciated by the Chinese during their overseas trips.
Medical care gains traction
Outbound medical tourism is on the rise. Driven by the dissatisfaction with their public hospital system and the lacking ability to care for certain health conditions locally, the more affluent segment of the Chinese population is increasingly turning to foreign-based healthcare providers to treat their medical conditions. While South Korea and Japan tend to attract Chinese consumers who seek cosmetic surgeries, medical services in farther destinations like the United States and Germany are more likely to appeal to those suffering from more severe illnesses like cancer and retina detachments.
The growing concerns about the availability of quality healthcare services have made it onto the agenda of the Chinese government. In fact, the Chinese authorities have unveiled plans to develop the tropical island of Hainan off its South-East coast into a medical tourism hub. Designated as a pilot zone, the USD 3 billion project is expected to provide treatments for various types of cancer, fertility, cardiovascular and cerebrovascular diseases, traditional Chinese medicine and spiritual retreats.
A gradual shift in the travel preferences of the Chinese, particularly the younger, smartphone/social media-savvy generation, can be observed. The next generation tends to be less interested in the traditional focus on shopping and is searching for more authentic, local cultural experiences. The new emphasis on intangible benefits, such as happiness and experiences, also means that the major industry players will have to adapt themselves to the evolving tastes of the more discerning Chinese consumers.
Watch out: Chinese travel preferences are changing.
An excellent example of this phenomenon is the decline of China’s demand for cruises in 2018 after the decade-long, steady growth on a year-on-year basis. The main reason for the slump: international cruise lines have adapted too readily to the conventional Chinese consumption habits, which demand shops, Asian restaurants, gaming machines and karaoke bars to be found on the ships. In contrast, modern-day consumers search for cruises that allow them to experience foreign cultures and relax.
Travelling during trade war?
If the trade conflict between China and the United States exacerbates further, the dynamics of global tourism will inevitably be affected. For the first time since 2003, the number of Chinese travellers entering the United States decreased by nearly 16% on a year-on-year basis in 2018. This shift was observed despite the fact that outbound Chinese trips have risen by nearly 13% overall. Moreover, a further depreciation of the RMB will imply that Chinese consumers are more likely to travel within their borders, ultimately benefiting local businesses.
Regardless of the trade war, the rising Chinese middle class is profiting from higher disposable incomes, fewer visa restrictions and better flight connections and will continue to significantly shape the global tourism industry.
This article forms a part of the ’Arising Asia’ series in which we explore the growing economies and expanding middle classes of emerging Asia.