China Is Lashing Out at Neighbors by Withholding Tourists

Jun 15, 2017

When the first pieces of a controversial U.S.-made missile defense system arrived in South Korea in March, China—which vocally opposes the deployment—responded with a weapon of its own: Its tourists.

Though Beijing denies involvement, within days Chinese tour operators began canceling trips and tour packages that would send Chinese tourists to South Korea, resulting in a 40% decrease in Chinese visitors in March compared to the year prior. The following month inbound Chinese tourism was down 66%, translating to 450,000 fewer tourists in April alone.

South Korea isn’t alone in experiencing Chinese disapproval through a decline in tourism dollars. Hong Kong, Taiwan, Vietnam, and Japan have all experienced varying degrees of China’s cruise ship diplomacy, and the consequences can hurt. Some 133 million Chinese tourists traveled abroad last year, spending $261 billion dollars, up 20.2% over the year prior according to data compiled by World Travel and Tourism Council (WTTC). After seven consecutive years of growth exceeding 20% spending by Chinese tourists is expected to cool somewhat this year, but spending by Chinese traveling abroad is expected to continue growing by an average 6% per year over the next decade, topping half a trillion dollars annually in the mid-2020s.

“Of the factors driving the growth, the first one clearly is more and more people coming into the middle classes every year,” says David Scowsill, WTTC’s President and CEO. But it’s also driven by Beijing, which encourages its citizens to travel abroad. Coupled with a potent sense of shared nationalism among its citizenry, those outbound travelers and their billions of dollars provide the country with a unique mechanism to cajole its regional neighbors to come around to its way of thinking on any number of issues—and potentially punish those who do not.

Beijing doesn’t wield its weaponized tourists overtly. Travel boycotts usually start with vague warnings about a destination issued by China’s tourism administration, instructions to travel agencies urging them to send tour groups elsewhere, or simple nationalist messaging by state-controlled media casting a destination in a negative light. But if even a small fraction of China’s 133 million outbound tourists can be discouraged from visiting a country, the results can be devastating to tourism economies.

Last year both Taiwan and Hong Kong each saw significant declines in arrivals of mainland Chinese tourists compared to 2015—16% and 7% respectively—with particularly sharp declines coinciding with moments of particularly high tensions with Beijing. For instance, after the inauguration of a more nationalist Taiwanese administration under President Tsai Ing-Wen in May, year-over-year mainland tourism dropped nearly 30% for the five months following.

Tourism numbers tend to rebound as tensions relax, but for South Korea and its ongoing disagreement with Beijing over the so-called THAAD missile system, the pain continues. Chinese tourists accounted for nearly half of the 17 million foreign visitors to South Korea last year. But according to travel industry data tracker ForwardKeys, bookings for stays between four and eight nights by Chinese visitors are down 28% for the second quarter of this year compared with a year earlier.

For countries that have come to rely on their prosperous and populous neighbor for an annual influx of tourism dollars, the message is clear: When you cross Beijing, the danger isn’t that the Chinese will come pay you a visit—it’s that they won’t.

A version of this article appears in the June 15, 2017 issue of Fortune with the headline "Tourists: China's New Political Weapon."

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