China’s (not really) open borders/ Global industrial recession/ EU-US agreeing to disagree/ Beyond the debt ceiling/ Greece

1. China’s (not really) open borders

International tourism flows from China collapsed during the pandemic on closed borders.  But even as China has moved out of lockdown and its borders have reopened, there is little evidence of a strong recovery in international tourism.  China’s volume of international air passenger transport is sitting at ~25% of its pre-pandemic levels.

This slow recovery process can be seen starkly across Asia.  Chinese tourist arrivals into several Asian economies (with data available until March or April) are down by >75% from December 2019 levels, and in some cases by much more (although with no seasonal adjustment). Stronger performances are reported in Singapore and Thailand, with Chinese arrivals at 30-40% of pre-pandemic levels. Hong Kong is the exception, with mainland arrivals in April at close to December 2019 levels.

This recovery in outbound international tourism is much slower than other aspects of the Chinese recovery process.  Indeed, domestic tourism has recovered strongly.  China’s Golden Week in early May saw record numbers of travellers within China; and domestic flight movements are back at pre-pandemic levels.

There are several plausible reasons for this difference between domestic and international tourism: lags in organising travel after borders reopened, lingering risk aversion on health risks, and reduced flight capacity and higher prices (a worldwide issue).  But international tourism in other parts of the world has recovered much more strongly.  China is an outlier.

Anecdotal evidence suggests that China’s borders are de facto not fully open (people being questioned on departure). And geopolitical concerns may deter some Chinese tourists, as well as a measure of official encouragement to holiday at home.  As through Covid, closed borders may be a feature for the CCP rather than a bug.  Just as the market profile of Chinese merchandise trade is being shaped by geopolitical considerations, tourism may be also (note weak tourism flows into Taiwan, Japan, and South Korea).  Indeed, outbound tourism has been weaponised by China previously.

Decoupling may be more evident in tourism flows more than in merchandise trade. For countries that benefited from the spending power of Chinese tourists, this sluggish recovery in Chinese international tourism will come at an economic cost. 

Elsewhere

I contributed to a Trade Knowledge Exchange podcast last week on trade policy in a world of competitive industrial policy, with Amar Breckenridge and Keith Rockwell (formerly chief spokesman at the WTO).  The podcast is available here

The full note is available at: https://davidskilling.substack.com/p/global-briefing-chinas-not-really