Large deficit in outbound, inbound travel will start shrinking: experts
China's tourism industry enjoyed robust growth in 2016 thanks to the central government's stimulating policies and innovative financial practices in the industry, like mergers and acquisitions, experts told the Global Times on Tuesday.
However, given that there is still a $100 billion deficit between revenues generated by outbound and inbound travel, experts pointed out some headwinds in the sector, such as the lack of qualified services and a potential tax increase following the value-added tax (VAT) reform.
In 2016, domestic tourism revenue jumped 13.6 percent to 4.69 trillion yuan ($680 billion), the People's Daily reported on Monday, citing information released at a national tourism conference in Central China's Hunan Province.
Based on estimates by the World Tourism Organization, the tourism industry contributed to 11 percent of China's GDP in 2016, and was responsible for 10.26 percent of the country's social employment, equal to the world's average.
Domestic tourists made 4.44 billion trips last year, up 11 percent year-on-year, according to statistics released by the China National Tourism Administration on January 9.
"The knock-out number signals that China's tourism industry has embarked on a new era," Xia Jiechang, academic advisor at the Tourism Research Institute of the Chinese Academy of Social Science (CASS), said at a forum for the release of the academy's tourism industry report in Beijing on Tuesday.
As China's economic structure is strategically upgrading, especially in the real economy, the tourism industry has become an important engine of economic growth and an underpinning for local employment, Song Ding, a Shenzhen-based market analyst from the China Development Institute, told the Global Times on Tuesday.
"That's why the Chinese government stepped up efforts to boost the industry last year," Song explained.
The State Council, China's cabinet, issued dozens of guidelines in 2016 for the tourism industry, according to the CASS' report, including the building of local "characteristic town," which also meets the government agenda for a "new type of urbanization."
In addition to favorable policy support, the exploration of new financial models concerning mergers and acquisitions in 2016 was also critical in elevating the competitiveness of China's tourism industry, experts noted.
For example, China International Travel Service merged with China National Travel Service (HK) Group in August, in a bid to "consolidate their position as the industry's leader and increase market share," Jin Zhun, the secretary-general of the Tourism Research Institute of CASS, said at the forum.
The Chinese government expects tourism revenue to reach 7 trillion yuan by 2020. According to China's 13th Five-Year Plan (2016-20), the tourism industry will account for more than 12 percent of GDP in 2020.
Revenue deficit
In 2016, inbound trips increased 3.8 percent to 138 million while outbound trips rose 4.3 percent to 122 million. The revenue deficit is estimated to have reached $100 billion in 2016, according to Song.
The yuan's depreciation against the dollar is part of the reason behind the huge deficit, Song said, but it also highlights the obstacles impeding the fast growth in China's tourism industry.
"The industry's service and management level is uneven, or sometimes unregulated," Song explained.
Supporting facilities run by domestic entrepreneurs, like hotel chains, have not gained a globally well-recognized reputation, Xia said. "If you take a look at the global top 100 hotels, 80 percent are operated by foreign competitors."
Also, as outbound Chinese tourists spend more than 70 percent of their budget on shopping, making "Made in China" products more appealing to domestic consumers is also a problem that needs to be addressed, Song noted.
The gap between outbound and inbound trips is likely to shrink in the coming years, according to the CASS report. The report forecasts that the growth of outbound travel in the next few years will slow due to the "evaporation of demographic dividends," while inbound trips are likely to grow steadily at 5 percent.
Another difficulty plaguing China's travel industry is the potential increase in tax liabilities in the wake of the country's VAT reform, experts said.
"Tourism is a labor-intensive industry, but labor costs cannot be deducted following the tax reform, which actually would incur a surge in the tax rate," Jin said.
