Second, third-tier cities: today´s winners - Shaun Rein

Shaun Rein

China´s first tier cities seem to be getting out of breath, while second and third-tier cities blossom. Business analyst Shaun Rein has been predicting the shift already for a long time, he tells the South China Morning Post. The rising prosperity of lower-tier cities may boost tourism to cheaper destinations like the Philippines and Thailand, he adds.

The South China Morning Post:

“For years I have been persuading people to focus more on China’s second and third-tier cities,” said Shaun Rein, managing director of China Market Research Group. He said people in lower-tier cities are more optimistic about their future and therefore more willing to spend money than their counterparts living in big cities. 

“First tier cities are becoming pretty much depressing these days, with some of the big companies cutting their budgets. The middle class is feeling the pain of reduced payments,” Rein said. 

He reasoned that with more affordable housing and basic necessities in lower tier cities, residents there are “much more confident” than their first-tier city counterparts and thus feel more comfortable as consumers... 

The rising prosperity of lower-tier cities may boost tourism to cheaper destinations like the Philippines and Thailand, according to Rein.

More in the South China Morning Post.

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Education and tourism might be next in stopping capital outflow - Victor Shih

Victor Shih

The efforts by China´s financial authorities to reduce the outflow of capital has already reduced many investment plans by the China. But financial analyst Victor Shih sees a few more holes in the country´s policies that might be stopped soon too: education and tourism, he tells Sourceable.

Sourceable:

Still, the Chinese determination to choke cash outflows appears to be serious, and could have implications that extend far beyond property and into other sectors whose payrolls and future plans are increasingly dependent on Chinese money, like universities and tourism operators. 

What China is doing with capital controls is similar to its management of the Internet, which Beijing has accomplished with great success. Access to censored websites “is not impossible from China, but it’s just a big hassle, and because it’s a hassle, very few people manage to do it on a regular basis,” said Victor Shih, who specializes in Chinese fiscal policy at the University of California San Diego. 

The goal with currency conversion restrictions “is exactly the same – to create enough friction to deter the vast majority of people from converting sizable amounts of money,” he said. 

There is much more, too, that China could do, Prof. Shih said. Every month, Chinese people spend between $15-billion and $20-billion (U.S.) abroad on services like tourism and education. It’s a huge cash drain, and one that China could pare back by restricting the number of people who can travel and study abroad. 

“I really think this is where it’s all heading – dialling back the clock to the early eighties when all flows, including visits, were tightly regulated by the government,” Mr. Shih said. 

“The leadership would like a certain combination of outcomes – stable growth, and also currency stability, and also no financial risk,” he said. “In order to accomplish that, you just have to control more and more stuff.”

More in Sourceable.

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Cosmetic giants deal with pricing gap - Ben Cavender

Shaun Rein

One of the main reasons Chinese consumers buy themselves silly abroad - including Hong Kong - is the high difference in pricing of similar products in mainland China. Cosmetic giants Estee Lauder and AmorePacific have lower their prices up to 30 percent, as also the government is revamping its import fees. More will follow, tells retail analyst Ben Cavender to the South China Morning Post.

The South China Morning Post:

“These global cosmetics names are now narrowing the price gap between China and overseas, and we believe more are probably about to follow suit,” said Ben Cavender, director with the China Market Research Group. 

“The fact that western brands are becoming cheaper in the mainland may also discourage people from travelling to Hong Kong to make purchases,” he added. 

Imported cosmetics used to face tariffs of 84 per cent, reflecting both import and point of sales taxes. 

But the tariffs have now gone down to 29 per cent for most beauty products thanks to policies introduced in 2016 designed to boost domestic consumer spending... 

With incomes rising, Chinese shoppers have become one of the largest single markets for western consumer brands. 

Prior to the tariff reduction, the significant price premium on foreign goods in China saw many mainland consumers shop via cross-border online marketplaces or while travelling abroad. 

Analysts said that stiff competition from rival brands and a weakening yuan might take some of the sparkle off the Chinese market for international cosmetics groups in spite of the price cuts. 

Over the last two years, AmorePacific has pushed ahead with its strategy to make inroads into China, competing head to head with established international players such as Estee Lauder. 

“The market is competitive and the rise of South Korean brands are posing a challenge to the rest of the players in China,” said Cavender.

More in the South China Morning Post.

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The Plough purchase shows change in tourist habits - Jeffrey Towson

Jeffrey Towson

The purchase of the Plough at Cadsden in rural Buckinghamshire, the bar where then-prime minister David Cameron and president Xi Jinping toasted on their relationship by the Chinese company SinoFortone shows a change in the typical tourist habits, says Peking university business professor Jeffrey Towson in the China Daily.

The China Daily:

Chinese tourists were shifting away from shopping to experiences. Museums, palaces, and pubs were all becoming major tourist destinations. 

The Plough purchase is not SinoFortone's first investment in the UK. Last October, it announced it would invest 2 billion pounds in two eco-parks, in north and southwest Wales. "So, this pub purchase is consistent with that focus," said Jeffrey Towson, a professor who teaches investment at Peking University. He added that this particular investment also has symbolic meaning. 

The fact that Xi had visited the Plough was important to Chinese tourists, but it was also important to a prominent Chinese-owned company such as SinoFortone, he said.

More in the China Daily.

Jeffrey Towson is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch fons.tuinstra@china-speakers-bureau.comor fill in our speakers´request form. Are you looking for more experts on consumption at the China Speakers Bureau? Do check out this list.  

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Online travel market: fast moving to mobile - Jeffrey Towson

Online markets are fast moving to mobile. The US$1.7bn purchase of Skyscanner by leading travel booking service Ctrip illustrates that move, says Jeffrey Towson, business professor at the Peking University in the Financial Times. "What they need next is a hotel network," adds Towson.

The Financial Times:

Skyscanner is focused on the online travel market shifting to mobile devices and three-quarters of Ctrip bookings are now made online using smartphones, according to Jeffrey Towson, professor of investment at Peking University. Mobile visits account for 59 per cent of Skyscanner’s total traffic.... 

Prof Towson said: “The biggest opportunity for Ctrip is to connect two massive groups — Chinese consumers, and international airlines and hotels. What they really need next is a hotel network. That’s where the real power is, with tens of thousands of hotels across Europe and Asia as potential clients.”

More in the Financial Times.

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Shanghai Disney is not yet there - Shaun Rein

Shaun Rein

Shanghai Disney opened with a lot of hype, but the number of visitors fell short of the expectations. The entertainment park is not yet where it wants to be, says business analyst Shaun Rein, although it might still bounce back from its current under-performance, he tells the South China Morning Post.

The South China Morning Post:

Visitor stories so far, widely aired on social media, have also focussed on the 3-4 hour wait for some rides, or attractions shut down early, due to maintenance or overcrowding.

Despite making the experience as Chinese as possible – including Mickey Mouse-shaped braised pig knuckle, Peking Duck pizza, and a Chinese zodiac-inspired garden of Disney characters – Shaun Rein, managing director of China Market Research Group said Disney made a “big mistake” in not better handling long queues, which generated negative word of mouth and have forced consumers to adopt a “wait-and-see attitude”. 

“There’s still pretty good demand, but people [appear to] want to wait six months, 12 months, and even longer until the issues are ironed out,” he said. 

A BNP Paribas report agrees that the negative press on long waits may be why foreigners, too, are have been hesitant to visit “for the time being”. 

But this early performance of arguably China’s most high-profile tourist opening to-date could also prove an ominous reflection of just how hard the industry has reacted to a slowdown in income growth and weakened consumer confidence. 

“Consumers are really double-checking, and triple-checking where they visit. They really want to get the best value,” said Rein. 

He says outbound travel and tourism is 16 times the value compared with a decade ago, but Chinese buyers are now trending away from expensive places such as Europe, and towards “exotic and cheap” places in Southeast Asia, and domestic wilderness locations such as Yunan, Guilin, Qinghai, and Gansu. 

“Domestic tourism is still hot, but Shanghai is not,” he said... 

Rein said Chinese tourism will continue to grow, but people are changing where they want to go, so companies “need to be very agile in what they offer.” 

“But Disney will bounce [back], Disney is fine,” he said.

More in the South China Morning Post.

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Slowdown is not hurting outbound tourism - Wei Gu

Wei Gu

China is looking at a slowdown of its double digit growth, but that is not going to hurt the outbound tourism, observes Wei Gu, founder of Weini Media in Shanghai, at the opening panel at ILTM talking about trends in Chinese wealth and travel.

You can find the link to the panel here.

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500 US dollar for a night is nothing for these kids - Rupert Hoogewerf

Rupert Hoogewerf

Rupert Hoogewerf or Hurun gives more details from his China Luxury Tourism market 2016, where he details the spending habits of rich millenniums at CNBC. For those kids, hotel rooms for US$500 are a basic average.

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International tourism: key growth industry - James Roy

James Roy

Despite a relative slowdown in economic growth, international tourism has seen more Chinese than ever before. Preferences for other luxury expenditure is slowing down, says retail analyst James Roy to the VOA.

The VOA:

Over the last five years, the number of Chinese travelers doubled to 120 million people; one in ten international travelers is now from China. 

James Roy, a Business Analyst at China Market Research Group, said Chinese tourists are now traveling farther, and to many more destinations. “You know in the past where it was more about buying an expensive watch or a bag, and showing that off, now it’s much more about sharing on social media all of the exotic places that you’ve been to,” Roy said. 

The number of tourists into China also grew, but slightly, at just 2.2 percent in 2015. Tourism supported 65 million jobs in China, and made up 7.9 percent of the country’s gross domestic product. Nearly 57 million foreign travelers came to China that year, spending more than $57 billion.

More in the VOA.

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New York Times journalist Ian Johnson discusses the spiritual values Chinese are looking for today.

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The rise of the super rich travelers - Rupert Hoogewerf

Rupert Hoogewerf

Luxury spending might have been hit by Xi Jinping´s anti-corruption campaign, but travel is on the way up. Rupert Hoogewerf just published his 5th China Luxury Travel Report and sees the super rich spending more time and money on more trips. Technology and luxury travel agencies set the trends, he tells Thoughtful China.

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You can download the full report here.(pdf)

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Japan tourism catching up among Chinese - Shaun Rein

Shaun Rein

The Fukushima disaster and a flare of nationalism made a dent in Japan´s position as favorite tourist destination for Chinese. But, helped by a slumping currency, Japan is back on the agenda for Chinese tourists, tells business analyst Shaun Rein in Japan Times.

Japan Times:

Visits by Chinese slowed after the 2011 nuclear disaster and a 2012 revival of tensions between Tokyo and Beijing. After exploring South Korea, Taiwan, Thailand and Bali, Indonesia, many affluent Chinese travelers are making up for lost time, said Shaun Rein, Shanghai-based managing director of market intelligence firm CMR.  

 “There’s massive pent-up demand,” Rein said.

To lure more big spenders, Japan has slashed sales taxes on a wider range of items favored by foreign tourists and is setting up duty-free counters at hundreds of shops in Tokyo and elsewhere, even in drug stores — medicines and supplements are big sellers among Chinese and Russian tourists. 

The Laox duty-free shop in Ginza was crammed with Chinese buying watches, cosmetics, robotic vacuum cleaners and space-age rice cookers. 

Ultra high-tech, detachable toilet seats with automatic lighting and lid opening and closing, that warm, wash and dry are another big must-haves among Chinese, even though the products are made-in-China for export to Japan. 

“The new status symbol in China is buying things and having experiences,” said Rein. “It’s not just buying a Louis Vuitton bag but how you bought it and how you did something cool.”

More in Japan Times.

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Why Japan tops 2015 as tourist destination - Shaun Rein

+Shaun Rein 

After a boycott over the past three years, Japan is back as a favorite in 2015 for Chinese tourists, followed by the US, now relations are more stable, tells business analyst Shaun Rein to WSJ wealth editor Wei Gu. Hong Kong is passe, and domestic travel is in, especially for youngster who do not focus on shopping anymore.

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New NZ visa? Show your UnionPay platinum card - Wei Gu

Wei Gu

The agreement between China and the US to issue 10-year visa might have been a first watershed moment, other countries are following suit. WSJ wealth editor Wei Gu discovered soon for a New Zealand visa, showing your platina UnionCard opens door.

Wei Gu:

Countries around the world have been streamlining visa processes for Chinese travelers, who have made 98 million trips so far this year. They are also big spenders, splurging the most on tax-free shopping last year and accounting for 27% of global tax-free travel spending, according to Global Blue, which processes tax refunds.

Chinese travelers have already begun to discover the allure of New Zealand, accounting for the second-most number of tourists there, after Australia. Average spending by Chinese visitors to New Zealand is higher than any other groups of tourists, according to China Unionpay. 

New Zealand topped a list of 22 nations as Chinese tourists’ most satisfying destination in the first quarter of 2014, according to China Tourism Academy, a research center under China’s Tourism Bureau. The poll measures travelers’ satisfaction with public services, environmental conditions and security. New Zealand’s fresh air and stunning scenery can provide a bit of a reprieve for those living in heavily polluted Chinese cities. 

But the influx of Chinese tourists—and property buyers—has also led to a backlash in New Zealand. Mr. Peters, leader of conservative political party New Zealand First,argues that the credit-card policy essentially allows Chinese to buy their way into the country by skirting key criteria. 

However, Kevin Bowler, chief executive for government agency Tourism New Zealand, said any effort to streamline the visa process for international visitors are good for the tourism industry.

More in the Wall Street Journal.

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Trend: Chinese tourists volunteer in poor countries - Wei Gu

+Wei Gu 

Chinese tourists diversify fast from the cattle-like crowds moved around by large coaches. Some are starting to join a global industry of volunteers, helping out in poor countries, and enjoying new experiences. WSJ´s Wei Gu recently joined with her family on a trip to Cambodia. Her report in the Wall Street Journal.

Wei Gu:

Looking out of the tour bus window, Cambodia looked like China did 20 or 30 years ago. People rely on motorcycles to travel around, just as we did with bicycles in China back then. I saw a family of four squeezed onto a motorcycle, which reminded me of my dad carrying my mom and me around Shanghai on a single bicycle. 

The roads in Cambodia are quite congested and it took 10 hours to make the 250-kilometer journey from Phnom Penh to Siem Reap. 

While Cambodia’s roads are bad, its electronic infrastructure is well-developed and accessible. People from monks to “moms” at the orphanage carried smartphones, and they talked on the phone all the time. The monks explained that they used cellphones for work and not entertainment, but they kept snapping pictures of us or talked on their cellphones when conducting a house blessing. 

Mobile connectivity is cheap and reliable. I got a local phone card for $5, for five gigabytes of data, enough for 35 hours of surfing on the Web. This kept me abreast of the Hong Kong protests during the whole time we were in Cambodia. In fact, the connection was better on Cambodia’s muddy roads than in my Hong Kong apartment. 

Cambodians are incredibly connected. A 17-year-old boy at an orphanage we visited quickly added me on Facebook after he saw the pictures I posted about the orphanage where he lived. Now I’m seeing his updates every day, and he has asked how to get in touch with one of the Hong Kong girls who went on this trip. 

When American and Japanese students visited our schools in Shanghai, we exchanged snail-mail addresses. The letters would come after a month or so and stopped after one or two exchanges. It was difficult to keep in touch back then. 

In some ways, Cambodians are more global and more informed than many Chinese, who are cut off from global media. YouTube, Google , Facebook and Twitter are banned in China. Even now, English is still taught mostly by Chinese teachers at schools, while in Cambodia many students learn from native speakers.

Wei Gu and family

More in the Wall Street Journal.

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Why teaching Chinese manners is so tough - Zhang Lijia

+Lijia Zhang 

This week millions of Chinese tourists will visit foreign countries, for many the first time. And they will shock the natives of the guest countries by their loud voices, spitting habits and pushy ways to jump queues. Author Zhang Lijia ponders at her weblog why it is so hard to teach Chinese some manners.
 
Zhang Lijia:

I ask myself: Why are the citizens of China, a country that boasts the oldest continuous civilization, incapable of comporting themselves in a more civilized fashion? 

I think some aspects of such bad behavior can be attributed to cultural environment. Take for example the habit of speaking in a loud voice. The Chinese environment is often quite noisy, and if you speak too softly – or ‘hum like a mosquito’ as we would say – no one can hear you. My ex-husband, a Brit, used to complain that I spoke unnecessarily loudly. But that was just the way I was brought up. My father never speaks but thunders, which always startled my children when they were little. 

As to China’s ubiquitous spitting, the Chinese people do seem to spit more than anyone else. Many claim to do so for health reasons: hacking and spitting are just the way to clear the lungs and throat. There’s also a deep belief that swallowing phlegm is bad for you whereas some westerners consider it preferable to spitting in public. 

And spitting is generally socially acceptable. Li Hongzhang, the late Qing’s de facto foreign minister, frequently disgusted foreign dignitaries when he spat into his spittoon that he carried with him everywhere. 

Some poor behavior is just not excusable. I blame the Chinese people’s lack of public concern, one of the short-comings of our national character. Some of my neighbours casually throw rubbish out of their kitchen windows while keeping their own floor as polished as a mirror. 

The better educated citizens tend to have better public manners. But those who can afford overseas holidays are not necessarily well-educated, worldly or sophisticated. Indeed it takes greater effort to acquire sophistication than money. Newly-gained wealth might have lent certain arrogance to some who feel that they are entitled to do whatever they are pleased simply because they are paying. 

Plenty of Chinese have not learnt to respect the local cultures or the local laws. “The rule of law” isn’t well-established in this country. If they can break the multitude of regulations without facing the consequences, many will readily do so. It’s little wonder that the smoking ban in restaurants hasn’t worked at all, something I’ve always predicted. 

American and Japanese tourists also met with similar criticism when they first ventured abroad and misbehaved in public (I am not sure they were ever quite as rude as some of my compatriots.) Chinese tourists, ambassadors of the country, simply have to behave. The sheer volume – nearly 100 million Chinese travelled abroad last year – means their behabior has an impact. 

An online survey conducted by South China Morning Post last summer indicated that more than 50 percent of Hongkongers held negative feelings towards Mainlanders because of the ill-behaved tourists. The people from the former colony are better-mannered, partly because they were spared of the brutal regime of Chairman Mao who deemed one’s good manners as “bourgeoisie pretention”. The Japanese have become the most popular tourists in the world for their willingness to spend as well as their courtesy. 

In the long run, with more money, higher education levels and more exposure to the outside world, I trust our fellow citizens will also adopt appropriate manners. I myself have modified the speaking volume, except when I give a public speech. I still spit, mostly into my own tissues. And I’ve learnt to refrain myself from spitting on the British ambassador’s lawn when I am invited to attend the Queen’s birthday party there.

More at Zhang Lijia´s weblog.

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