China tightens credit limit on offshore spending

THE Chinese Government has capped spending by Chinese tourists on the national credit card UnionPay, with some returning travellers reportedly being checked over by Customs in Shanghai. But the growing Chinese
middle class is unlikely to stop holidaying overseas . . .

Millions of Chinese heading off for their spring festival holiday this year apparently had a lot less money to spend overseas.
Beijing authorities had slapped a 100,000 yuan (US$15,713) cap on how much Chinese tourists are able to spend overseas on their credit card, UnionPay.
China’s State Administration of Foreign
Exchange reportedly issued a directive to banks to place a ceiling on overseas transactions of all UnionPay cardholders last year.
The restrictions were to take effect from
January 1 and the new rule comes on top of a 10,000 yuan equivalent daily cap per UnionPay cardholder. The restriction was actually phased in from the last quarter of 2015, with SAFE
apparently limiting some overseas withdrawals to 50,000 yuan equivalent between October 1 and December 31.
According to latest data from the UN World Tourism Organisation (January 2016), Chinese tourism expenditure increased by 66 per cent through the first three quarters of 2015.
In 2014, expenditure was US$164.9 billion — a 28.2 per cent increase over 2013, which was 26.1 per cent up on 2012.
How the new rules on UnionPay card withdrawals will impact on the spending habits of Chinese tourists remains to be seen, but there is no doubt Chinese big spenders are becoming more wary, with reports that returning tourists have been checked over by Customs officials  at Shanghai Airport.
In a new report on Chinese tourism, the Hong Kong-based CLSA says that, over the past few months, these checks have become stricter, and those found to have overseas purchases
exceeding 50,000 yuan have been forced to pay duties.  However, to date, these checks occur only in Shanghai.
It is hardly surprising that, at a time when
authorities are seriously concerned with the level of capital outflow from China, they are also cracking down on tourist spending offshore.
In comparison to what Chinese tourists spend overseas, inbound international tourists spent US$51.7 billion in 2013 and US$56.9 billion in 2014. UNWTO figures show this spending up just 1.1 per cent in the first three quarters of 2015.
Tourism and travel is one of the pillars of economic growth in China, says David Scowsill, President and CEO of the World Travel & Tourism Council
In an interview in London, Scowsill told ATI: “The Chinese Government sees tourism and travel as one of its top five growth industries, so over the last 15 years it has successfully allocated resources to develop the infrastructure necessary to support growth.”
He says: “The Chinese have developed infrastructure ahead of the needs of people travelling. They have built their high-speed train networks, airports, terminal runaways and hotels.
“Infrastructure is important. If you take
Beijing’s Capital Airport, it is now the second busiest in the world after Atlanta (in the US). Beijing Airport is now operating at full capacity. The city of Beijing receives about 100 million visitors annually – of whom five million are
international.
“The Government recognised 10 years ago that a second airport would be required in
Beijing to handle traffic growth. With a second airport, Beijing will be ready to absorb another 100 million visitors.”
Work on the second facility, known as Beijing Daxing International Airport, began in 2014. It will reportedly cost RMB80 billion and is
expected to be completed in 2018.
CLSA says that, in its 12th Five-Year Plan (2011-15), China is set to build 55 new airports, a 30 per cent increase. This would lift the number of airports from 175 as of end-2010 to 230.
The new airports, plus 91 airport extensions and 16 relocations, will cost a total of RMB425 billion (US$69 billion). Construction of the new airports should help improve ease of outbound travel.
Scowsill says China is following the benchmark set in the US and the European Union, where a citizen is no more than 90 minutes drive from an airport. “When those airports are built (in China) it will stimulate even more growth for the carriers,” says Scowsill.
 “When we look at travel and tourism in
China, 90 per cent of it is domestic travel. This amounts to 3.7 billion trips, of which 2.3 billion are made during the Chinese New Year period.”
Scowsill says statistics show that every US$1 million spent in travel and tourism in China generates US$1.4 million in GDP, supporting 144 jobs.
In 2014, the travel and tourism sector
accounted for 9.4 per cent of Chinese GDP, or RMB5,811 billion (US$946 billion). The forecast is for the sector to grow by 6.2 per cent yearly over the next decade.
According to the WTTC, the industry supports 66 million jobs directly and indirectly in related industries in China, the second-largest number in the world for travel and tourism. By 2025, China will overtake the US as the largest travel and tourism country, Scowsill says.
In the short term, stock market turmoil and other economic issues could dampen enthusiasm to travel. “But we are not seeing a slowdown. International outbound traffic is still growing fast, and we don’t see that slowing in the short term,” he says. “China’s outbound market will be 120 million, and we are talking about that number increasing to 200 million by 2020. It is going to be ahead of schedule — the phenomenon is very clear.”
But there will be hiccups on the way, like the drive to limit overseas spending on UnionPay cards — a move that is steeped in political
motives as much as in a desire to rein in the outflow of capital.
(Analysts have said that the curb on UnionPay cards is part of Xi Jinping’s anti-corruption drive. It has been said that UnionPay cards have been used to launder money, and to move large amounts of cash offshore.)
Spending may be affected, but the growing Chinese middle class is unlikely to stop going overseas. CLSA’s survey found that they are now going further afield, overlooking Hong Kong and instead heading to North Asian countries, Australia, the US and Europe.
Meanwhile, the outlook for the global travel and tourism industry goes with economic flows. “We follow natural recessionary cycles, but within that, we still tend to grow faster than the broader economy,” says Scowsill.
Europe has been slow to come out of this
recession, but even so, tourist arrivals into Europe grew by five per cent in 2015 and passenger traffic out of Europe in the first eight months of 2015 was 5.7 per cent up on the corresponding period of the previous year. Northern American traffic rose 4.5 per cent, against 7.7 per cent in Asia Pacific.
Scowsill says: “The reason is that the aviation industry continues to grow. Low-cost carriers have been a big stimulus because they are connecting the secondary and tertiary cities and passengers no longer have to fly to the hubs. The other factor is growth in the middle class. These people initially travel domestically, then they go overseas, and their ranks are growing very fast.”
Currency movements impact travel. With
devaluation of the South African rand, for
example, more people from Europe and the US have been visiting that country.
Globally, in a world with depressing economic news, travel and tourism is one bright spot of consistent growth, generating much-needed cash receipts for cash-strapped governments. “If you look back over the last 30 years, the industry has grown consistently at more than four per cent globally every year. It grows about one per cent above global GDP.”
Scowsill says travel and tourism represents 9.8 per cent of global GDP. The WTTC forecast  is that travel and tourism in 2015 was worth US$7.8 trillion and created 284 million jobs. South Asia is expected once again to have been the fastest-growing world region for total travel and tourism GDP in 2015, with forecast growth of 7.7 per cent. In Asia, the travel and tourism industry generated US$2.2 trillion or 9.2 per cent of Asia’s GDP in 2014, exceeding that of the mining, banking, and education sectors.
It creates more jobs than the education,
financial services, banking, mining, chemicals manufacturing, and automotive manufacturing sectors. In 2014, it provided 150 million Asian jobs, and, at 4.7 per cent, the industry is forecast to outpace growth of the total Asian economy (3.8 per cent).
Despite its economic weight, however, Scowsill says governments do not always place much priority on the industry until there is a disruption.
In countries where tourism and travel is well developed, it is typically driven by the national leader, who holds his or her Cabinet Ministers to account for the well-being of the industry.
As passionate advocates of the industry, Scowsill and his team at WTTC often seek
opportunity to present compelling economic data to Ministers. He says it is such things as job creation that attract attention.
“When we state our case and point out the impact on job creation, some of our meetings could turn out to be light bulb moments for Presidents and Prime Ministers because they don’t really understand how important our
industry is,” says Scowsill.