China’s growing tourist spending deficit

According to government forecasts, China will likely face a $100 billion tourist spending deficit in 2014. This is directly linked with the Chinese tourists travelling and spending their money outside their home country’s borders. The fact that less foreign tourists are coming to China and therefore spend less on the Chinese soil is not helping either.

Chinese tourists spending abroad

The China Tourism Academy states that there were 54.1 million Chinese overseas travelers in the first six months of 2014, an increase of 19% compared to 2013’s figures. The forecast for the whole year is 116 million Chinese overseas travelers for 2014. Chinese tourists spent $68.8 billion abroad in the first six months of this year which might lead to $155 billion for the whole year.

Less foreign tourists coming to China

According to the China National Tourist Office, with only 26.83 million visitors, there were 2.4% less foreign tourists to come to mainland China, Hong Kong and Macau in the first six months of 2014.  Mainly because foreigners who would come to China are worried that it would affect their health considering the poor air quality and the issues on the safety of food.

According to the State Administration of Foreign Exchange, these travelers spent only $24.8 billion.  This lead to a deficit of $44 billion for China after the subtraction of the expenditures made by Chinese travelers abroad. China has had a deficit since 2009 but it became concerning in 2012 as its deficit took Germany’s place in the ranking of the world’s deepest tourist spending deficit.

Reasons why Chinese tourists spend abroad

The main reason for such a deficit is that Chinese shoppers spend fortunes abroad on expensive products. However they still make a bargain compared to what it would have cost them back home. Indeed luxury goods often cost more in China due to high taxes and price increases. Moreover counterfeit in China has become so hard to detect than even well-established fashion brands are worried. This is understandable considering that fake goods are found even in real stores. Last year Louis Vuitton and Gucci took the lead and made the announcement that their brands will not be opening stores in China anymore.

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Atsushi Takeda, the chief economist at the Japan’s Itochu Economic Research Institute said that: “China is trying to upgrade its economy, shifting from low-end products to high quality, high value industries. But the outflow of wealth will prevent such industries from growing at home.”

Chinese government has to quickly react to this phenomenon and stop the flight of the wealth abroad. Otherwise it would probably prevent China to boost its domestic demand.

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