Economic overview
Since the early 1980s, China has transformed itself into the world’s largest exporter and second-largest oil consumer. Growth during the last 20 years, often above 10% annually, propelled China’s economy into second place in global rankings by 2009.
In recent years, Chinese authorities have shifted the country’s economy away from a reliance on infrastructure investment and trade. Consumer spending now plays an increasingly important role. This change has coincided with an economic slowdown.
China’s gross domestic product (GDP) expanded by 6.9% in 2015, its weakest performance in 25 years. During the first half of 2016, year-over-year growth was 6.7%. Recent stimulus measures—boosting credit growth, relaxing housing polices and increasing spending on infrastructure—have given the economy a lift. Oxford Economics forecasts growth of just 6.6% this year and expects the slowdown to continue as the lower-growth norm for China.
Business travel industry insight
Almost 57 million people visited China in 2015; more than half arrived from the Chinese territories of Hong Kong and Macau. South Korea, Japan and the U.S. are the next-largest sources of inbound travel. Three-quarters of travelers visit China for leisure. Still, China is the world’s second-largest business travel market after the U.S., attracting more than 14 million business travelers in 2015. Chinese travelers drive business travel spending, which was valued at more than US$170 billion in 2015. Foreign travelers accounted for just 9% of business travel spending in 2009 and could make up just 3% by 2017, according to Oxford Economics and the World Travel & Tourism Council.
State-owned airline groups Air China, China Eastern and China Southern face a growing challenge from HNA Group, owner of airlines Hainan, Tianjin and Capital. The rapidly expanding Chinese middle class, numbering more than 100 million adults, has disposable income for leisure travel. That’s attracting low-cost carriers with international ambitions, such as Spring Airlines.
International hotel chains traditionally have invested in high-end properties, while local companies—like Huazhu Hotels Group, Jin Jiang International and Homeinns Hotel Group—have covered the lower tiers. But the expanding middle class is driving change in hotels, as well. International mid-range and economy brands such as Best Western, Holiday Inn Express and Ibis now are operating in major cities and destinations like Dalian, Harbin and Suzhou.
Opportunities
- Wage increases and high government spending are raising living standards. That’s yielding stronger consumer demand from China’s middle class, which is growing and spreading across the country. The uptick in consumer spending is in sync with government policy that aims to increase domestic demand.
- The government is seeking to reduce bureaucracy and lessen its role in business to give the free market greater room to flourish. This presents companies with new opportunities to expand.
- Low-cost carriers are growing and slowly gaining acceptance among Chinese business travelers.
Challenges
- Economic growth is likely to fall short of targets set in the government’s 2016-20 plan. The government may be tempted to boost short-term growth by compromising on reform efforts designed to support future economic expansion.
- Businesses must deal with the twin challenges of rising industrial costs and a slowing economy.
- Some hotel companies have used tax reform to justify price increases. Travelers must be vigilant to avoid overpaying for accommodation.
Read about BCD Travel’s new majority ownership stake in China and Hong Kong. And talk to your account manager about how BCD’s Research & Intelligence experts can help you translate trends, support your company’s growth and get your travelers where they need to be across the globe.
