Why won't foreign tourists come to China?

It seems that a few people high up in the Chinese hierarchy are finally starting to realise that, when a country operates on a parallel system to the rest of the world and does nothing to accommodate foreign visitors, there are costs.

In a post last year, I talked about the large gap between the number of foreign tourists that visit China and the number of Chinese that holiday abroad, and how this is hurting the country's capital account balance. The figures for 2017, which I provided in my post, were 130 million trips abroad made by Chinese citizens, as opposed to only 30 million trips to China made by foreigners. It appears that in 2018 the gap got even wider, with 30 million trips to China against 150 million trips abroad by the Chinese. These figures for inbound tourism are seriously unimpressive, with even far smaller countries like Thailand or Turkey managing to attract more visitors over the course of a year.

According to a report by Sixth Tone, based on previous reports in the Chinese-language press, it seems that a real effort is now being made to address this deficit. In August the Chinese government published a set of proposals to encourage inbound tourism (although they don't appear to address any of the real issues, talking only about "developing new tourist routes, performances and local products to attract visitors"). Then last week Shanghai brought a bunch of foreign experts on tourism together at the China International Import Expo, and announced a number of projects designed to attract foreign visitors.

Most importantly, earlier this month Ant Financial and Tencent announced in quick succession that it has now become possible to link foreign credit cards to Alipay and WeChat. Alipay is rolling out a system geared specifically to foreign travellers, who will be able to use it for a 90-day period. In principle this would go some way towards solving one of the biggest difficulties that short-term visitors face in China, in other words the impossibility to pay via mobile phone, in a country where using cash is now probably rarer than it was at the peak of Maoism.

If this could finally happen, it is only because the People's Bank of China took the step of allowing the two companies to open up to foreign bank accounts, abandoning concerns about money laundering and cross-border cash flows. Leaving aside the fact that Alipay's new feature for foreign users doesn't seem to be working all that well, this suggests that an effort is being made all the way at the top to start making China a bit more convenient for foreigners to navigate.

Some of the reasons for this shift aren't hard to see: James Liang, the co-founder and chairman of Ctrip, who has long been calling on the government to make China more open to foreign visitors, claimed at a conference in May that the deficit between inbound and outbound tourism is costing China a figure equal to 1.7% of its huge GDP. At a time when economic growth is at the lowest point in decades, and the trade war with the US is causing much damage, this state of affairs is obviously becoming a problem. Since restricting foreign travel for ordinary Chinese remains politically impractical, there is no alternative but to try and make the country a little bit more inviting for outsiders.

At the end of October the Ctrip chairman, who seems to have made this his mission, gave a talk at the "World Culture and Tourism Conference 2019" in Xi'an which was summarized in a popular WeChat post, entitled 携程梁建章：为什么外国游客不愿意来中国? (Ctrip's James Liang: why won't foreign tourists come to China?). The post has gained over 100,000 views, showing that this topic is finally gaining some traction. Mr. Liang claimed in the talk that while outbound tourism has been growing fast over the past decade, foreign tourism to China hasn't really grown at all. He pointed out that foreign tourism makes up 1-3% of GDP in most of the world's biggest economies, while in China's case it only accounts for 0.3%. In his estimate, China's tourist sector still has the potential to rake in an extra 1-200 billion dollars annually.

Mr. Liang then outlined the three main reasons why, in his view, foreign travellers are not coming to China. The three points he made are the difficulty of getting a Chinese visa, the inconvenience of not being able to access mobile payments, and the "cost of internet controls". The last point is eye-catching, because it is rarely made in public in China: the Ctrip chairman pointed out that the blocking of foreign websites (which he euphemistically referred to as "foreigners not being able to access their own country's internet after reaching China") makes it hard for Chinese travel destinations and businesses to promote themselves abroad, while also making it hard for foreign travellers to share their experience of China on social media.

As the WeChat post's author adds: "foreign travellers make an effort to get here, and then you don't even let them post in their "Moments". That's not beneficial for the reputation of China's travel industry" ("Moments" is where you post photos in WeChat). The article then suggests lifting the restrictions on the internet for foreign travellers, which seems unlikely to happen any time soon.

In any case, it may well be that a shift in thinking is indeed happening, and that the leadership is waking up to the fact that the lack of foreign visitors is an economic issue. It is even possible that more measures are on the way. But whether these efforts to attract more tourists will lead to anything is an open question.

Making mobile payments easier is certainly an important step, but I suspect the biggest issue remains the difficulty and trouble in obtaining tourist visas, especially considering that citizens of developed countries no longer need visas at all to enter most of China's neighbouring countries. If the government really wanted to attract more foreign tourists, this would be a good place to start. Then there is the mind-boggling fact that a large proportion, perhaps even a majority, of hotels around China will not accept guests with foreign passports. This is seriously inconvenient for the independent traveller, not to mention unnecessary and unfair. Changing this state of affairs should not be all that difficult.

The larger point is that, beyond a certain level, isolationism has real economic costs. Over the last decade the general trend has been for China to become more closed towards foreigners, whether long-term residents or visitors, in step with the tightening of restrictions and ideological controls and the creation of a local internet that runs separately from the rest of the world. Meanwhile, the great firewall has become higher and harder to get around than ever before. Apart from tourism, there are certainly many other ways in which this is constricting economic growth and dynamism. It will be interesting to see if the pressure brought on by the trade war and the economic downturn may actually exert a push in the other direction, towards greater openness and global integration.

Foreign tourists aren't coming to China, and it is hurting the economy

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Most foreign residents in China seem to agree that the country has become a less easy place for outsiders to navigate over the last few years. From renting a house to accessing banking services, having a foreign passport rather than a Chinese ID is becoming more and more of a liability. This is probably part of the reason that the number of foreigners living in China is still pretty tiny, and not really increasing very fast either. I would argue that this is not to the country's benefit, although this can be a hard point to sell in China. 

It has become apparent, however, that there is one area where China's refusal to make more accommodation for foreigners is causing an immediate, tangible damage to the country's economy, and that is tourism. Over the last couple of years, various analysts have noted that China's current account balance has been hard hit by the gap between inbound and outbound tourism. To put it simply, there are currently far more Chinese travelling abroad than there are foreign tourists coming to China.

In 2017 Chinese tourists made 130 million trips abroad, spending a total of 115.29 billion US dollars. In the same year, the number of foreigners taking trips to China fell just short of 30 million. For a country of China's size and heritage, this is not a very impressive figure. By way of comparison, Thailand received over 35 million visits in the same year, Japan got over 28 million, and even not so glamorous Vietnam still managed 12 million.

It isn't hard to see why China receives few visitors. The unnecessarily restrictive visa regime for foreign tourists is one major factor. In a world where more and more countries allow visa-free travel (at least for citizens of developed countries), China is definitely not going down this path. While Americans, Brits and a few other nationalities are able to receive multiple entry tourist visas as part of reciprocal deals, citizens of most countries are generally given one-month visas. This is dependent on showing that they have tickets both to enter and leave China, and presenting evidence of hotel bookings for the entire duration of the trip.

For most individual travellers this is a burdensome requirement, based on the assumption that they have planned out their entire trip in advance. For young backpackers on their gap year trips around the world, this may well be reason enough to stay away from China all together. 

Then there is the hassle of getting around China as a foreign tourist. This has become much harder in recent years, precisely because of the same set of factors that have made life more convenient for long-term residents. Essentially, almost everything in China is now arranged and paid for through an ecosystem of smartphone apps that is very hard for outsiders to access. From cabs to cinema tickets, phone bills to airplanes, there is almost nothing that cannot be booked through your phone and paid for using WeChat.

Trying to do things the old way can be tricky, more expensive or downright impossible. For example, waving down a taxi on the street has become much harder in Chinese cities, since everyone uses Didi to hail a car. But you cannot use Didi unless you can pay with WeChat or Alipay, and you cannot do that unless you have a Chinese bank account. WeChat used to allow you to use its "wallet" function even without linking it to a bank account, but this is no longer possible (probably due to "security concerns").

For travellers not planning to open a Chinese bank account (which is generally impossible on a tourist visa anyway), getting around an already puzzling country has become a lot harder. Fortunately it is still possible to pay in cash in most establishments, although even this could soon start to change (I already know of one restaurant in Beijing that only accepts mobile payments).  

Then there is the truly incredible fact that a large proportion of Chinese hotels do not accept foreign guests as a matter of policy. This is the case even in cities like Beijing and Shanghai. While a few decades ago hotels needed a special license to accept foreigners, and only the high-end ones generally received it, nowadays all hotels could do so in principle. Quite simply many establishments do not want the hassle of having to register foreign guests with the local police, or do not know how to go about it, and so they just reject all foreigners. Although any Chinese city will still have hotels where foreigners can stay, this state of affairs represents a serious annoyance for the independent traveller, especially since it is the cheaper places that are most likely not to accept foreigners.

All in all, what emerges is the picture of a country that is simply not trying very hard to make itself welcoming to short-term visitors, even though this is actually costing it economically. The omnipresent sense of national pride and the state's growing security paranoia remain the best explanations. The strict visa regime is probably seen as a response to other countries' strict requirements for visiting Chinese citizens. The situations are not really comparable though: while most rich countries have a justified fear of illegal immigration, the chances of visitors from places like Australia or Germany overstaying their visas in China is almost non-existent (and they would hardly be able to lay low for very long, given the country’s omnipresent surveillance). The same sense of pride, the increased regimentation and control and the perceived need to monitor foreigners’ movements makes it hard to imagine changes to the rules that make China difficult for independent travellers, although many of them could be changed quite easily with some good will.

The fact remains that China’s diminishing capital account surplus is a serious source of concern for the government, and the large imbalance between how much Chinese tourists spend abroad and how much foreign tourists spend in China is a significant contributing factor (although obviously not the only one). Given that it is no longer politically feasible to restrict the majority of Chinese citizens from travelling abroad, there is little that could be done about this except opening up more to foreign tourism. 

Even within China, some have now begun to call for more openness. At the recent ITB conference in Beijing, Ctrip founder and co-chairman James Liang called for the government to make China more attractive to foreign visitors. He recommended relaxing visa policies, pointing to a study by the World Tourism Organization showing that only five countries worldwide have more restrictive visa policies than China, those countries being Angola, Gabon, Nigeria, Pakistan and Saudi Arabia. He noted that Turkey, which allows visa-free access for nationals of 78 countries, managed to attract more international visitors than the whole of China in 2017. He also recommended that the government build more museums and further develop airports and railway travel (this last suggestion might seem a bit superfluous).

While this is encouraging, I can't really see much being done to make China more inviting for foreign travellers any time soon. In the near future, tourism is probably going to remain one field in which China haemorrhages money towards the outside world.