China’s economic growth is set to be constrained by a slowing of recovery in the tourism sector as Beijing continues to pursue a zero-COVID policy, according to a new report by ratings agency Fitch.
The report, published Friday, notes that tourism contributed 11% of China’s Gross Domestic Product (GDP) in 2019 (pre-COVID-19) and that the pace of tourism growth had outperformed total GDP every year since 2014, up until 2020.
However, while the tourism sector had shown strong signs of recovery in 1H21 – with domestic tourism revenue and tourist numbers reaching 60% of 2019 levels – they had since fallen back to around 50% for FY21 and remain weak in 1Q22.
“The slowing recovery has been largely due to travel restrictions in a growing number of provinces amid the resurgence of Covid-19 cases since July 2021,” Fitch said.
“Fitch believes the government’s COVID-19 policies are largely driving the sector’s recovery path and an escalation in virus cases could weigh on tourism activities, putting a drag on China’s economic recovery.
“China’s ‘zero-COVID’ policy is likely to constrain any sustainable recovery of the tourism sector. This will add to the pressure on overall economic growth because of tourism’s high contribution to China’s economy at 11% of GDP before the pandemic.”
Fitch described China’s tourism sector recovery as “uneven”, with travellers showing a preference for “short-distance, high-quality vacations and family entertainment, such as theme parks.
By contrast, scenic spots that target non-local visitors have experienced a slower and more volatile recovery trajectory.
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