China's tourism industry could surpass one trillion yuan by 2026: Citi

Business Times

3 days ago

[SINGAPORE] China's tourism sector will gain a boost as the country seeks to diversify from manufacturing to other services, said Citi in a note on Thursday (Jun 5).
This could transform the country's tourism sector into a one trillion yuan (S$178.9 billion) industry by 2026, said the bank's China economists Yu Xiangrong, Hu Yuanliu and Ji Xinyu.
Policymakers have introduced substantive measures to support inbound tourism from abroad in an effort to soften the blow from US tariffs on goods exports, said Citi.
This includes waiving unilateral visa requirements for 30 days of travel for an additional nine countries in South America and the Middle East in May, bringing the number of countries with unilateral visa-free entries to 47 countries.
In December 2024, the country's transit policy had also been extended to allow visa-exempted travellers to make stops of up to 10 days (240 hours), a duration previously set at 72 or 144 hours, depending on the traveller's citizenship. This change also expanded permitted stay locations by an additional 60 ports and 24 provinces, the note found.
Tax rebates have become easier to obtain for tourists, with the minimum purchase threshold reduced from 500 yuan to 200 yuan in April. Considerable effort has also been undertaken by payment companies along with the country's central bank to improve convenience and operability for foreign tourists, the note said.
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Such measures were notable in returning inbound tourism to pre-pandemic levels. The country's Ministry of Commerce reported that foreign tourists spent US$94.2 billion in 2024, an increase of 77.8 per cent from the year before. This accounted for about 0.5 per cent of gross domestic product.
Currently, travellers to China comprise largely of residents from Hong Kong, Macau and Taiwan, making up about 80 per cent of the 131.9 million inbound travellers in 2024, said Citi.
But momentum from beyond the region is building, with visits by foreigners increasing 40.2 per cent in the first quarter of 2025 from the previous corresponding period.
'The policy efforts are paying off,' the Citi team wrote, explaining that China's brand as a travel destination has become increasingly attractive. 'More international tourists seeking to experience a 'real China'.'
Lower-tier cities and local destinations have benefited from this trend, beyond popular travel destinations such as Beijing and Shanghai, the bank said. 'For example, Zhangjiajie has been popular for Korean tourists.'
The deflationary environment in China, coupled with a weak renminbi, could further boost tourist spending, Citi wrote. If demand continues into the rest of 2025, the bank forecasted a 40 per cent rise in foreign tourism and a 10 per cent rise in travellers from Hong Kong, Macau and Taiwan.
Macroeconomic boost
Revenue from inbound tourists in 2025 could grow to 880 billion yuan (S$157.4 billion), in a 30 per cent increase from the previous year, Citi projected. This would add 0.15 percentage point to the country's GDP growth, the bank said.
Local labour markets stand to gain from increased travel, with official reports estimating that 1.6 times more jobs are created from services compared to goods exports of the same value. Citi projected that the 30 per cent travel export growth would create about 500,000 non-farm jobs, bringing headline unemployment down by about 0.1 percentage point.
Yet, a tourism boost may not be sufficient to relieve the country's deflation struggles.
'China's deflation is mostly industrial-driven with quite an entrenched demand-supply imbalance,' the report said. Travellers to China made up about 0.5 per cent of total retail sales in 2024, the bank said, which would not be enough of a demand boost to move the needle.