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  • -67-

    Measuring the Economic Impact of Tourism in China

    Guo Songhong*

    Abstract

    In the past two decades, both inbound tourism and domestic tourism have achieved

    sustainable growth in China. Tourism has grown to a significant size, and it contributes

    substantially to the Chinese economy. However, the analysis of its economic impact is still a

    neglected issue in China(Xu: 1999). This paper tries to measure the economic impact of

    tourism, evaluate the contribution of tourism to the national economy, and find some policy

    implications. The impact includes direct and indirect increase in production, labor income,

    employment, imports, indirect tax etc. through the injection of tourist expenditures into the

    economy. To catch both the direct and indirect impact of tourism, the paper first constructs

    a 48 sector social accounting matrix(SAM)for tourism analysis. Then the SAM multipliers

    are calculated. The total direct and indirect impact of tourist expenditures is the product of

    the multipliers and the primary injection of tourist expenditures.

    In order to strengthen the communication between China and the rest of the world and

    to earn hard currencies to facilitate imports of technology and facilities, after 1978 the

    Chinese government made inbound tourism a priority, as many developing countries were

    doing. However, the study finds that domestic tourist expenditure has a larger economic

    impact on Chinese economy in terms of production, value added, labor income, indirect tax

    and employment. The implication is that development of domestic tourism is more desirable

    than that of inbound tourism. Because export ability has been improved and foreign

    exchange reserves are high, the role of inbound tourism as a foreign exchange earner has

    declined. Domestic tourism development could stimulate present weak household

    consumption, and its development would not trigger a serious problem of insufficient supply

    as occurred in the 1980s due to the substantial improvement of the ability to meet tourism

    demands. It is time to shift tourism development priority from inbound tourism to domestic

    tourism.

    1. Tourism development in China

    The first travel agent, the Amoy Overseas Chinese Travel Agent, was established in October 1949,

    after the founding of the People's Republic of China, and this lifted the curtain on tourism

    development in China. In the 1950s and 60s, tens of travel agencies were established to receive

    overseas Chinese and foreign government guests and other foreign visitors. However, they were

    『国際開発研究フォーラム』21(2002. 3) Forum of International Development Studies, 21 (Mar. 2002)

    * Doctoral student, Graduate School of International Development, Nagoya University

  • Measuring the Economic Impact of Tourism in China

    -68-

    government agencies intended to achieve political purposes such as strengthening friendship and

    introducing China to the rest of the world rather than firms intended to make profits. Inbound

    tourism did not have sustained growth until 1978, when a policy of reform and opening to the world

    was adopted.

    Table 1: Inbound visitor arrivals and tourism receipts: 1978-2000

    Note: * Visitor arrivals include both overnight stay tourist arrivals and same day visitor arrivals; one

    entry to the border is counted as one arrival.

    Note: ** The method of calculating tourism receipts changed from 1994 when the international

    standard was adopted. It is not proper to make simple comparisons with the figures of previous years.

    Source : The National Tourism Administration(NTA), The Yearbook of China Tourism Statistics

    1,809

    4,203

    5,703

    7,767

    7,924

    9,477

    12,852

    17,833

    22,819

    26,902

    31,695

    24,501

    27,462

    33,350

    38,115

    41,527

    43,684

    46,387

    51,127

    57,588

    63,478

    72,796

    83,444

     

     

     

     

    132.3

    35.7

    36.2

    2.0

    19.6

    35.6

    38.8

    28.0

    17.9

    17.8

    -22.7

    12.1

    21.4

    14.3

    9.0

    5.2

    6.2

    10.2

    12.6

    10.2

    14.7

    14.6

    21.4

    25.7

    11.9

    263

    449

    617

    785

    843

    941

    1,131

    1,250

    1,531

    1,862

    2,247

    1,860

    2,218

    2,845

    3,947

    4,683

    7,323

    8,733

    10,201

    12,074

    12,602

    14,099

    16,224

     

     

     

     

    70.9

    37.3

    27.3

    7.4

    11.6

    20.2

    10.5

    22.5

    21.6

    20.7

    -17.2

    19.2

    28.3

    38.7

    18.7

    **

    19.3

    16.8

    18.4

    4.4

    11.9

    15.1

    20.2

    19.9

    19.1

    Year Visitor Arrivals* (Thousand  People)

    Growth Rates  %

    Tourism Receipts (Million US  dollars)

    Rates  % Growth

    1978

    1979

    1980

    1981

    1982

    1983

    1984

    1985

    1986

    1987

    1988

    1989

    1990

    1991

    1992

    1993

    1994

    1995

    1996

    1997

    1998

    1999

    2000

    Average

    1980-88

    1990-2000

  • -69-

    Since 1978, a policy of reform and opening the door to the rest of the world has been implemented

    in China, and Chinese tourism has entered a period of reform and rapid growth. In order to earn hard

    currencies needed for imports of intermediate inputs in the process of industrialization, China put

    inbound tourism as a priority of development shortly after the reform. In the early 1980s tourism

    reception capacity was insufficient; in order to increase tourism reception for more inbound tourists,

    facilities such as government guesthouses and military airfields were provided for inbound tourist

    reception. Meanwhile, regulation of tourism investment having been gradually reduced, investment

    from other sectors and other countries flew into the tourism sector. For example, in the 1980s and the

    1990s many hotels were built using capital from abroad and other sectors. Travel agencies and hotels

    were changed from government agencies to business firms. The market mechanism was gradually

    introduced in the tourism sector. Inbound tourism was transferred from its previous status as

    “political activity”to its present status as“economic activity.”

    The reform and tourism promotion policies have improved tourism infrastructure construction, and

    tourism supply has been gradually improved to catch up with the strong demand. Competition and

    government management have upgraded the tourism services of China. In the past two decades

    inbound tourism has accomplished a rapid growth except for a decline in 1989 because of the incident

    of Tian’anmen Square(Table 1). In 2000, inbound tourism receipts reached 16.2 billion US dollars,

    ranking 7th in the world, accounting for 6.5% of total exports of China. The inbound tourism receipts of

    China in 1978 were only 263.9 million US dollars, ranking 41st in the world. In 2000, inbound visitor

    arrivals reached 83.44 million, of whom 31.2 million stayed one night or longer, making China the 5th in

    the world in terms of overnight stay international tourist arrivals. China has become one of the largest

    destinations and one of the largest international tourism earners. It has had“unprecedented growth

    in the history of world tourism development.”(Tang: 2001)

    Domestic tourism grew spontaneously and did not arouse much attention from the government and

    investors before the middle of the 1980s. From that time on it gradually became popular due to the

    increase in income and changing of living style brought about by the economic reform; more and

    more people wanted to travel for pleasure and recreation. Table 2 shows the growth of domestic

    tourism of China after 1984. Before the incident of Tian’anmen Square in 1989, the annul growth rate

    of domestic tourism receipts remained over 30%. After the decline that year, domestic tourism

    recovered quickly and strongly, tourism receipts in 1991 exceeded the level of 1988. The average

    growth rate of tourism receipts from 1986-2000 was 19.9%, which was higher than the growth of total

    household consumption. The domestic tourism receipts reached 317.5 billion yuan and visitor arrivals

    reached 744 million in 2000.

  • Measuring the Economic Impact of Tourism in China

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    Table 2: Domestic visitor arrivals and tourism receipts: 1984-2000

    Note: * After 1993, domestic tourism receipts data was obtained by questionnaire, and it

    is not appropriate to make simple comparisons with the figures of previous years.

    Source : NTA, The Yearbook of China Tourism Statistics

    Domestic tourism and inbound tourism are two distinctly different tourism activities. With