A Time Series Analysis of Chinese Outbound Tourism to Australia
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A Time Series Analysis of Chinese Outbound Tourism to Australia 1Lim, C. and 2Y. Wang 1University of Waikato, New Zealand, 2Griffith University, Australia, E-Mail: [email protected] Keywords: Chinese outbound tourism; ADS system; Business travel; Holiday destination; Time series modelling EXTENDED ABSTRACT 25,000 200 Economic development and improvement in 180 living standards, as well as political liberation in 20,000 160 China have contributed to the growth in Chinese tourist arrivals 140 to Australia international travel demand. Additionally, the 15,000 120 supportive role of the Chinese government in 100 outbound tourism development and China’s 10,000 80 (in thousands) (in thousands) Chinese out bound inclusion in the World Trade Organisation have tourists 60 and will ensure a continuing ease on travel 5,000 40 restrictions, and enhance the opportunities for Number of Chinese outbound tourists 20 Number of Chinese tourists to Australia Chinese citizens to travel overseas. Since the 0 0 implementation of the open door policy in 1982, 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 tourism development in China has experienced Year rapid growth, making the country the fifth largest international tourism destination in terms of both Sources: ABS (1993-2003) and CNTO (2004) tourist arrivals and tourism receipt in 2003 (WTO, 2004). In the meantime, China has also become an important international tourism Figure 1: Total Chinese outbound tourists and source market, especially for countries in the Chinese tourists to Australia, 1993-2003. Asia Pacific region. In 2002, China was ranked 7th in the world’s top Chinese outbound tourism has been managed and spenders on international tourism. The total regulated by the Approved Destination Status expenditure by Chinese outbound travellers (ADS) system, which is based on bilateral reached US$15.4 billions, a 10.7 percent increase tourism agreement between China and overseas over 2001 (WTO, 2004). Even though a very destinations. The ADS system restricts the small percentage of Chinese citizens travels overseas destinations Chinese nationals can abroad, this is considered by many destinations travel to, monitors the travel balance account, to be a lucrative market, outspending many and also restricts which foreign tour company is major markets in the Asian and Western allowed to operate in the Chinese market. countries. It has only taken a decade for China’s outbound This paper describes the development of Chinese tourist numbers to increase at an annual growth outbound tourism in general, and to Australia in rate of 19.4 percent from 3.7 million in 1993 to particular. Box-Jenkins (1970) univariate time 20.2 million in 2003. China has emerged as one series modelling is used to analyse Chinese of the most significant tourist source countries tourist arrival patterns to Australia for the period for Australia. This market has been growing at 1984-2004. This approach provides two simple an average rate of 23.7 percent per year between and useful models for representing the behaviour 1993 and 2003 (see Figure 1). In particular, the of observed time series processes, namely the dramatic increase in the number of Chinese autoregressive (AR) and moving average (MA) tourists to Australia has taken place after 1999 models. Tests for stationarity in the time series when Australia became the first western country of tourist arrivals are also conducted. to be granted Approved Destination Status by the Chinese government. 2246 1. INTRODUCTION Chinese outbound tourism has been managed and regulated by the Approved Destination Status In 1978, Deng Xiao-Ping introduced economic (ADS) system, which is based on bilateral reforms and the open-door policy in China. Since tourism agreement between China and overseas then, the Chinese government started to destinations. The purposes of ADS include recognize tourism as a means to economic “controlling the mobility of Chinese citizens, development and international tourists started to protecting the national tourism sector, and flow to China. Although international travel by limiting the outflow of foreign currency” (WTO, Chinese citizens for leisure purposes was not 2003, p.20). Another major breakthrough in permitted immediately after the implementation outbound travel came in 1997 when Australia of the open door policy, the government has and New Zealand signed the ADS-agreements gradually eased its control over outbound travel. with China, which became operational in 1999. Since then, Chinese people were able to travel While the absolute number of outbound Chinese outside of Asia (WTO, 2003; Travel and tourists is impressive, the percentage of Chinese Tourism Intelligence, 2004). Additionally, with people travelling abroad relative to their the approval of the State Council, the Public population is small. Nonetheless, it is considered Security Bureau (PSB) and CNTA announced in by many destinations to be a lucrative market, 1997 the “Temporary rules on Mainland Chinese outspending many major markets in the Asian outbound travel on self-financed mode”, which and Western countries. With China’s strong signified that Chinese outbound travel had economic performance, there is a tremendous evolved from a trial to an official basis (Travel growth potential in the Chinese outbound travel, and Tourism Intelligence, 2003). The ADS- especially by the expanding middle class in agreement with the European Union was signed China. As estimated by the World Tourism in February 2004 and became effective in Organisation (WTO), China will be the fourth September 2004. This agreement will facilitate largest international tourism market in the world Chinese group tourism to 26 member states of by 2020, representing 6.4 percent of the total the European Union through simplified visa market share, and nearly 100 million outbound application procedures. By mid September of travels will be undertaken by Chinese residents this year, 76 countries would have been granted (WTO, 2000). ADS by the CNTA, with some Latin American countries being the most recent countries to join According to several studies on Chinese the ADS system. outbound tourism development (for instance, Zhang and Heung, 2001; Pan, 2003; WTO, 2003; Overseas destinations visited by Chinese tourists Travel and Tourism Intelligence, 2004), there is can be broadly grouped into two categories. The a general consensus that outbound tourism in first group includes Taiwan and China’s two China started in the early 1980s and it has gone special administrative districts (SAD), namely, through three stages. The latter includes travel to Hong Kong and Macao, while the second group Hong Kong and Macao, travel to the border consists of all the foreign countries. Hong Kong regions and intra-Asia countries, and travel to and Macao have always been the top two foreign countries beyond Asia. destinations for Chinese outbound tourists. However, there has been numerous debates Travel to Hong Kong was technically permitted whether SADs should be regarded as domestic in 1983 when the Guangdong Provincial Travel rather than international tourist destinations. Corporation began to operate “tours for visiting Excluding Hong Kong and Macao, Thailand, relatives in Hong Kong”. Chinese residents must Russia, Japan, South Korea, USA, Singapore, travel with a tour organised by the China North Korea, Australia, Germany and Canada National Tourism Administration (CNTA) were the top ten overseas destinations for designated travel agencies and at the expense of Chinese tourists in 2000 (see Table 1). their overseas friends or relatives. The following year, such tour was extended to Macao and made Chinese outbound tourism has been available to citizens in other provinces who had predominantly business travels until 2002. Since relatives or friends in Hong Kong and Macao. the relaxation on overseas travel and increase in However, outbound travel by Chinese really disposable income, the market share of self- came into existence in 1990 when bilateral funded private travel has grown rapidly. In 2002, tourism agreements with Singapore, Malaysia private travel accounted for 61 percent of total and Thailand were signed. The agreements outbound trips made by Chinese citizens. In the allowed Chinese leisure tourists to travel to these same year, trips purely for leisure and holiday countries as members of the Chinese Travel accounted for 50 percent of the total outbound Service (CTS) organised group tours. 2247 travel, rising by 45 percent over the previous average annual growth rate of real GDP of 9.42 year (Travel and Tourism Intelligence, 2004). percent between 1978 and 2000 (World Bank, 1978-2000). As a result, China’s economic Table 1: Top destinations by Chinese outbound output had more than quadrupled during this tourists in 2000 period. Rank Country The living standards of the Chinese people have 1 Hong Kong also improved rapidly. In the period of 1978 to 2000, the average growth rate of the Gross 2 Macao National Income (GNI) per capita for China was 3 Thailand 7.15 percent. In 2000, the GNI per capita of 4 Russia Chinese citizens was US$840, which was more 5 Japan than 4 times that in 1978 (World Bank, 1978- 6 South Korea 2000). Another economic phenomenon in China 7 USA that cannot be overlooked is the geographic 8 Singapore imbalance in economic development, and income disparity in different regions. The economic 9 North Korea reforms were first implemented in China’s 10 Australia coastal areas. According to Wang and Sheldon 11 Germany (1995), urban GDP per capita was 2.5 times of 12 Canada rural GDP per capita in 1993. The gap between Source: CNTA, 2004 the wealthy and poor areas has widened over time. In 2002, the average annual disposable In the early 1990s, several government policies income of city households was 3 times more than implemented had great impact on the outbound that of rural households (National Bureau of visitor numbers, especially for business Statistics of China, 2003). In spite of the uneven travellers. For instance, the China’s Travel distribution of wealth, a large proportion of the Abroad campaign was launched in 1991 to Chinese population has incomes which are encourage more Chinese to travel overseas.