Research Paper on Effects of Tourism on China

Introduction

Tourism means various things to various people and resources. (Tourism, n.d.), describes tourism as the act of visiting various places for leisure purposes. However for the purposes of this paper, we shall make use of the definition by United Nations World Trade Organization (UNWTO) which defines tourism as the activity of travelling to a new area for purposes relating to work or leisure (Ugurlu, 2010) . This paper aims at analyzing the effects of tourism in China and to help us understand this, we shall provide some background information in terms of statistics of the tourism industry in China, key tourist attractions as well as the impact of tourism on the economy.

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According to (China tourism statistics in the first half of 2017, 2017), an average of 2 billion local tourists visited various tourist attractions in China in 2017 while at the same time 69 million foreign tourists made trips to China. The United Nations Educational, Scientific and Cultural Organization (UNESCO) is tasked with the responsibility of identifying and protecting heritage sites that are of value to mankind all over the world. These sites though under the territory of the host country, they are open to people from all over the world. UNESCO had by the end of 2017, identified 52 heritage sites in China -both cultural and natural as well as mixed heritage sites which form majority of the tourist attraction sites in China (Main tourist sites, n.d.).

Tourism activities have great effect on the economy of a country. This paper will focus on the effects of tourism on the economy of China. The effects can be either positive or negative. (Economic impact of tourism, n.d.), outlines the positive effects as generation of foreign exchange revenue, contribution to government revenue, creation of employment as well as fuelling infrastructural development. In relation to positive effects, foreign exchange services arising from tourism activities generate money for the host country thus providing financial investment in other sectors of importance like healthcare, education and industrial development. According to (Statista, n.d.), tourism is the main source of foreign exchange in about 38 % of countries in the world. According to (Statista, n.d.), foreign exchange earnings from tourism in China amounted to 120 billion dollars.

Tourism also contributes to the government revenue basket either directly or indirectly. Tourism achieves this milestone directly through taxation on salaries from people employed in the tourism sector and related industries and indirectly through levies on good sold to tourists (Statista, n.d.). The World Trade Organization (WTO), estimated that the total contribution of tourism to government revenues both directly and indirectly amounted to 1600 billion dollars in the late 2000s (Simm, n.d.). According to (Si , 2018), the tourism sector accounted for 2.1% of the gross domestic product (GDP), making the sector one of the top sources of government revenue.

At the same time, tourism affects the economy through creation of employment. This is directly through the hospitality industry and indirectly through related industries like the supply industry. According to (Economic impact of tourism, n.d.), the tourism industry supports 7% of workers globally. In China 23 million people are said to have been employed directly by the tourism industry. In 2016, the travel and tourism industry had directly employed about 20 million people (Number of employees in the travel and tourism industry in China, n.d.).

Infrastructure is a key factor when it comes to tourism and through it, tourism affects the economy. This is through the fact that, as an industry, tourism demands a certain level of infrastructural development so as to ensure that tourists are comfortable and are able to move around easily (Economic impact of tourism, n.d.). The success of the industry requires a high level of efficiency in the transport sector thus, the government has no choice other than to develop roads and airports as well as other related areas. In the case of China, rural tourism is gaining pace quite fast and in an effort to make the areas accessible, the Agricultural Development Bank of China has committed itself to ensuring construction of key infrastructure in order to support the accessibility of tourist sites in the rural areas (Lifany, 2018).

Positive as the contributions of tourism to an economy maybe, it also has some negative effects on the economy. They include enclave tourism, leakages, infrastructural costs, increase in prices, and economic dependence on tourism as well as job insecurity. (Economic impact of tourism, n.d.).An emerging trend in the tourism industry is enclave tourism where tourists are offered an all-inclusive package to travel. This means that the tourists will be holed up in one destination thus all their expenditure is limited to one place and thus fails to trickle down to the local economies (Economic impact of tourism, n.d.). This affects the economy since the expenditure is limited to one area maybe a hotel owned by foreigners who send money back to their countries leaving the host country with limited revenue. Enclave tourism in China has been promoted by the emergence of tourist resorts where tourists can book to stay in a resort exclusively thus little interaction with the local environment (Alu, Jiaming, & Min, 2013).

Direct income in tourism would refer to the cash balance arising from tourism that is left in the host country after all the deductions have been made.(Economic impact of tourism, n.d.), estimates that more than 70% of expenditure in most tourist activities goes to international companies like airlines, hotels as well as products. These deductions are the leakages and they affect the economy negatively. The leakages could be either be through imports or exports. Import leakages occur when the host country has to import products and services in order to meet the standards of the tourists who may not be comfortable with what the host country has to offer. Import leakages account for about 10-20% of leakages in developed countries, China included (Matthew, 2017). Export leakages occur when multinational companies are contracted by the host government to develop infrastructure since they are the only ones with the capital and intellectual ability to do it, or when local tourists travel to other countries on tourism basis thus spending a lot of revenue there. The profits from such ventures are sent out to the host countries of the multinationals. Finance analysts in China are worried over projections that more and more Chinese tourists are heading out to various international destinations, a trend projected to amount to 429 billion dollars in the next three years, an increase in export leakage compared to previous years (Matthew, 2017).

As mentioned earlier on in this paper, tourism is an industry that demands certain infrastructural standards from the hosting government (Economic impact of tourism, n.d.). This means that governments are likely to focus so much on developing the infrastructure at the expense of other critical areas. Economic experts in China have focused more on infrastructure development as stimulus as opposed to other fields (Wildau, 2017). By July 2017, China's government investment in infrastructure had reason to 21.4%, a high rate compared to other areas thus proving the priority given to infrastructure over other key areas.

(Economic impact of tourism, n.d.), notes that tourist activities in an area lead to increased prices of goods and services in an effort to maximize from the venture. The result of this is a local economy that is too expensive for the local population whose incomes do not increase proportionally with the increase in the prices of commodities. This often leads to a situation where people are running very vibrant and successful businesses but they struggle to survive because the income they get goes back to the businesses through the purchase of commodities. For instance, residents of Hong Kong, a territory found on the East of China complained that the presence of tourists in the area was causing the prices of property and services like healthcare to shoot up (Piuchan , Chan, & Kaale, 2017).

The growth of the tourism industry has given rise to economies that are dependent on tourism. This means that there is no diversification of economic activities as even the local community pegs its survival on tourism (Economic impact of tourism, n.d.). The risk of this trend is a situation where economic recession occurs when the tourism industry is not doing well maybe due to natural calamities or other issues. Tourism has led China to rely heavily on it so as to propel its GDP, thereby ranking at number two among the countries whose GDP relies heavily on tourism (Mapped: The world's dependency on the travel industry, n.d.). (China to become second largest tourism economy within the decade, n.d.), had projected that China would be second after the US as a tourism economy, thus making it vulnerable in case of a disaster.

Though tourism has created employment opportunities, it has also led to job insecurity. This is due to the fact that the tourism industry operates in two seasons, the high peak and low peak season (Morse & Smitch, 2015) (Economic impact of tourism, n.d.). During the high peak season from April to October when the inflow of tourists is high, various job opportunities come up so provide enough manpower to host the tourists. However, during the low peak season from November to March, when the inflow of tourists is low, employers let go of some employees and retain only the most necessary ones so as to cut down on running costs. This cycle of recruitment and layoffs create job insecurity due to the seasonal nature of some positions. In China, the case is no different as 12% of tourism industry workers are laid off annually during the low peak season (Statista, n.d.).

Conclusion

This paper has conclusively analyzed the impact of tourism on China's economy and it is evident that the influence is noticeable, both positively and negatively. However, China would reap more benefits from tourism as an industry if it would work towards maximizing on the positive impact and minimizing the negative impact.

References

Alu, L., Jiaming, L., & Min, L. (2013). Progress in enclave tourism study of oversees. Chinese Journal on Pop Resources and Environment, 78-81.

China to become second largest tourism economy within the decade. (n.d.). Retrieved March 5, 2018, from Worldwatch Institute: www.worldwatch.org

China tourism statistics in the first half of 2017. (2017, October 18). Retrieved March 5, 2018, from China National Tourism Administration: en.cnta.go.cn

Economic impact of tourism. (n.d.). Retrieved March 5, 2018, from Slideshare: www.slideshare.net

Lifany. (2018, March 5). Economic watch: How tourism is becoming a new driving force in China's growth. Retrieved March 5, 2018, from Xinhuanet: www.xinhuanet.com

Main tourist sites. (n.d.). Retrieved March 5, 2018, from UNESCO sites: www.cnto.org

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