KLIA is seening busy as usual on the first day of China tourist arrive.
CHINA’S reopening helps to boost optimism in the global economy, and ease concerns of recession as advanced economies slow down, weighed by higher interest rates.
While global disruptions caused by Covid-19 lockdowns are expected to ease gradually, the free movement of tourists will provide a much-needed fillip to global growth.The resumption of tourist arrivals from China is expected to boost the aviation industry, revive the battered tourism and retail as well as accommodation sectors.
Commodity and energy prices will also be supported by better economic performance in China but inflation could flare up due to the strong surge in demand relative to supply, according to Socio Economic Research Centre executive director Lee Heng Guie.
This positive development has partly contributed to the International Monetary Fund revising its global growth forecast for 2023, to 2.9% in January from 2.7% a quarter ago.
Despite the positive aspects, could China’s reopening be too late, thus affecting its economic recovery?An area of benefit is global trade where the recovery in China’s economic activities would help to improve global demand for merchandise goods, and in turn, support Malaysia’s export performance.The risk of disruption to domestic industries, due to long-drawn supply chain disruptions in China, would also be substantially reduced, said RAM Ratings head and senior economist, economic research Woon Khai Jhek.
China is among Malaysia’s largest trading partners, constituting about 20% and 15% of Malaysia’s total imports and exports respectively.Tourism is another opportunity from China’s reopening; tourist arrivals from China to Malaysia made up 12% of overall tourist arrivals and 18% of total tourist receipts in 2018.
A Chinese tourist spends, on average, RM4,921 in Malaysia; this is much higher than that spent by a Singaporean (RM2,022) and an Indonesia (RM3,571).
Chinese tourists contributed RM15.3bil or 17.8% of Malaysia’s total tourists receipts in 2019; they comprised 3.1 million or 11.9% of tourist arrivals in 2019, representing the third highest number of visitors into Malaysia, after Singapore (10.2 million or 38.9%) and Indonesia (3.6 million or 13.9%).Stronger tourism activities could boost Malaysia’s Gross Domestic Product (GDP) by at least one percentage point, further supporting United Overseas Bank’s (UOB) baseline GDP growth forecast of 4% for 2023.
In terms of Chinese tourist arrivals to Malaysia, the room to grow and recover is significant, as the number of Chinese visitors to the country was only 100,000 (1.9%) in the first nine months of 2022, compared with 3.1 million or 11.9% of tourist arrivals in 2019.
The Tourism, Arts and Culture Ministry is targeting five million Chinese tourists this year – a 60% increase compared with 2019, prior to the Covid-19 pandemic.
To make Malaysia a choice destination for Chinese visitors, hotels and travel agents should create new and attractive value-added packages, said Malaysian Association of Hotel Owners executive director Shaharuddin Mohamed Saaid.Shopping complexes and places of tourist attraction should also throw in the extras, without tourists incurring higher costs, while extended stays should be encouraged.So far, heavy promotions and attractive packages targeted at the Chinese tourism market are still not visible, and it is about time that Tourism Malaysia and tourism stakeholders and players embark on more advertising and promotion efforts to entice Chinese tourists, added Shaharuddin.
To get more Chinese tourists to visit Malaysia, there should be increased flights with convenient accessibility as well as the granting of no frills or tourist-friendly visas and entry requirements.
Thailand is extending to Chinese tourists visas on arrival and scrapping requirements for quarantine for all inbound tourists, noted Shaharuddin.
To prevent the risk of possible infections, a strict check should be conducted on the health status of Chinese tourists prior to their departures by the airlines, so that no further checks and quarantine are necessary, upon arrival.
What are the risks that the expected number of Chinese tourist arrivals may not happen?
Given the extent and duration of the Covid-19 lockdowns in China, the reopening could be too late, where a lot of firms could have difficulty reaching their optimum capacity, said Woon.
Rising costs
This would risk stalling the potential recovery of the Chinese economy; with rising costs and inflation, Chinese consumption, including outbound tourism, may be dampened.
China’s reopening and surge in demand may also put upward pressure on prices of energy and other related goods and services.
In Malaysia’s consumer price index (CPI), tourism-related service components including transport services, entertainment, recreation and cultural services, package tours and accommodation services account for 4.4% of the overall CPI weight, according to UOB.
This implies that every 10% increase in the prices of tourism-related services could directly add 0.4 percentage point to Malaysia’s headline inflation against UOB’s baseline forecast of 2.8% for 2023.The effect on prices of food and beverage as well as restaurant services were not included in the calculations due to its sizeable CPI weight that could over-inflate the estimate. However, UOB sees the potential upside risk, given that this category is the third largest expenditure item for tourists in Malaysia.Stable reopening
To mitigate these downside risks and sustain the recovery of the tourism sector, there should be consistent and stable reopening of countries and borders, minimal quarantine requirements, affordable travel and improved travel connectivity.Also important are visa facilitation, processing of passports, build-up of capacity in terms of airline seats, hotel rooms and supply of labour, technology improvements and e-payment facilities as well as better safety and security.
Against the opportunities and risks, a conducive environment is necessary to welcome tourists – that is what we should be working towards and we should not bring up things that turn them off.
Yap Leng Kuen is a former StarBiz editor. The views expressed here are the writer’s own.
