Abstract
China’s new normal
After more than three decades of high-speed development with an average GDP growth rate of nearly 10%, China has now entered the so-called ‘new normal’ development era (Hu, 2015). In the English literature, a clear definition of China’s ‘new normal’ economy is hardly seen. In Chinese media and state sanctioned discourses, new normal is used to demarcate a distinctively new era of economic development in China for the time being and also the ideal state that the Chinese economy should be developed. The term ‘new normal’ was mentioned by the Chinese President Xi Jinping in his speech at the Asia-Pacific Economic Cooperation (APEC) Economic Leaders Meeting in November 2014. Xi defined China’s new normal economy with three main characteristics: (1) economic development pace moving from high growth rate to middle–high growth rate, (2) economic structure maintaining its optimization and upgrading, and (3) the driving mechanism of the economy transferring from production elements-driven and investment-driven to innovation-driven.
Since 2014, it has been evident that the Chinese economy has been slowing down. A relatively low growth rate of around 7%, which is in contrast to the mostly double-digit growth rate in the past, has been the most identifiable feature of China’s new normal economy. While some Western economists may hold different views on China’s economic development, Chinese scholars such as Hu (2015) held a rather optimistic attitude toward the new normal. Hu (2015: 9) deemed the slowing down of the Chinese economy ‘inevitable’; however, the new normal would be ‘slower but steadier’. Under the new normal premise, the lower growth rate is associated with quality and invariantly interpreted as a better quality growth rate (Green and Stern, 2015).
Multiple factors may be attributed to the slowing-down of the Chinese economy. Nevertheless, China’s economic environment is much different now. It is notable that the cheap labour supply from its agricultural sector to support the exceptional growth of the manufacturing industry in the form of highly mobile peasant workers is no longer the case due to the population ageing; as such the so-called population bonus in pumping the Chinese economy has largely disappeared.
The legacy of the previous high-speed development in the economy turned out to be the issues the new normal economy needs to deal with. Furthering the economic restructuring is one of these key issues. While maintaining the world’s largest manufacturing industry, China needs to continuously develop and grow its tertiary sectors and increase the proportion of the added value of the tertiary sectors in its GDP. The domestic consumer demand is believed to be the ultimate lever to drive the Chinese economy, and a means to effectively reduce the risk of the economy’s overreliance on export.
In its previous economy growth, China has benefited tremendously from its large labour pool in its rural agricultural sector and the inflow of foreign direct investment (FDI) due to its opening up and favourable policies towards foreign investment. Now that the country is probably more capital rich than any other countries in the world and its labour-related population bonus has gradually disappeared, driving the economy to continue to grow would rely on innovation that seems to be the ‘catalytic agent’ to further release the energy by blending the existing economic elements.
China tourism in the new normal
Tourism has long been regarded as an important economic sector in the Chinese economy. In 2017, tourism’s contribution to the national economy reached 11.04%, and tourism-related employment accounted for 10.28% of the country’s total employment (Li, 2018). As a main component of the tertiary sector, tourism is believed to be a significant driving force of the Chinese economy in China’s new normal era.
To the Chinese economy, domestic tourism plays a significant role in driving the internal demand, which is believed to be key to the continuing healthy economic development in the country. The Golden Week system has been proved to be an effective holiday system to release Chinese citizens’ holiday and leisure needs. From 2015 to 2017, total consumption in tourism accounted for over 14% of the total value of consumption in the national economy (Li, 2018). With the increase of household income and the societal transition towards consumerist values, many new forms of tourism emerged in China. These include, but are not limited to, family travel, cruise tourism, self-driving caravan tourism, healthcare tourism, sport tourism, industrial tourism, and study/academic tourism. With the diversified tourism demands and emerging tourist markets, tourism supplies have to be redeveloped with quality as the focus. On 16 January 2019, the Ministry of Culture and Tourism issued the guidelines of implementing tourism service quality improvement plan, directing the whole industry attention to the quality of tourism supplies.
Tourism is also contributing to the country’s economic restructuring. In the vast rural area, China is facing the challenge to curb the decline of its rural communities, culture and traditions. Along with its socialist new rural community construction policies, the central government further formulated the rural revitalization strategy. Under this national strategy, tourism is perceived to an effective means to reform and reintegrate the rural production resources to realize rural revitalization. In this process, tourism also appears to be a theme for investors to consider to make capital investment in rural areas. Currently there seems to be a craze to invest and create tourism-themed small towns. However, it is yet to be testified to what extent the mushrooming tourism-themed small towns in China would be an effective rural revitalization development model.
Tourism, especially outbound tourism, may be used by the Chinese government as a trade balance vehicle in its international trade strategies. Nevertheless, China’s outbound tourism will also be inevitably subject to the influence of a favourable international trade environment. The ongoing trade war between China and the United States has already made the visitor arrivals from China to the United States plummeted. The ripple effect may be seen soon on the overall outbound tourism front.
The special issue
It is under such a grand background of China’s economic and tourism development that we proposed this special issue Tourism Economics in China: Facing the new normal. After some concerted efforts by the editors, reviewers and authors, we are happy to see the special issue is realized with six full research papers and one research note article. In relation to how tourism consumption can contribute to the domestic gross consumption in the Chinese economy as discussed above, Zuo and Lai examined how the housing wealth in Chinese households affect tourism consumption. This topic is relevant to the current economic situation in China. The real estate market has been driving China’s economic boom in the past. Housing wealth is indeed a perception-based or even a socio-psychological level personal asset construct that may affect an individual’s consumption level in tourism. Zuo and Lai’s empirical test using the 2014–2016 Chinese Household Survey data indicated that housing wealth did exert a bigger effect on tourism expenditure compared to household income. The study further disclosed that age and generational cohort moderated the effect of housing wealth on tourism consumption. Among the different age groups, the 31- to 40-year group and the over 70-year group seemed to have relatively higher tourism consumption elasticity to housing wealth than other age groups, reflecting the social realities of how family life cycle can affect an individual’s tourism consumption propensities. In addition, older generations appeared to be more sensitive to housing wealth changes than their younger counterparts in their tourism consumption behaviours. This may represent the consumerism value transition between different generations in China.
China’s economic development feat has uplifted a substantial proportion of its population out of the poverty. Tourism has been regarded as one of the many poverty alleviation methods in China. However, very few studies have examined the effect of tourism on poverty reduction in China using empirical econometric data. From a macroeconomic perspective, Zhao and Xia applied multiple indices in testing the effect of tourism on poverty alleviation in the country. Results showed that tourism significantly and positively reduced headcount ratio of poverty, poverty gap and poverty severity. However, the effects of tourism on poverty reduction varied across different regions of China. While a strong linear relationship between tourism and poverty reduction existed in Western provinces, for Eastern provinces, tourism’s contribution to poverty alleviation is not significant.
The hotel sector in China constructs a significant part of the country’s tourism economy. Two articles touch the issues of hotel productivity and the economic efficiency of the hotel sector. Dong, Peypoch and Zhang assessed intertemporal productivity of two- to five-star hotels in 30 Chinese provinces over the period 2009–2015 in their study entitled ‘Do contextual factors matter? Evidence from Chinese hotel productivity with heterogeneity’. Although experiencing a rapid expansion and fast development, hotels, star-rated hotels in China, faced several problems, such as insufficient new product, excess capacity and mismatched supply and demand. It is, therefore, crucial to evaluate performance of this sector, in particular in China where such measurement is still limited. Dong, Peypoch and Zhang conducted a hierarchical analysis by considering hotels’ heterogeneity in technological advancement and examined environmental and contextual factors which drove the productivity improvement of the hotel sector in China. The main findings implied that productivity in Chinese star-rated hotels experienced a slight deterioration. The authors found that trade openness and law system significantly affected the productivity change of star-rated hotels in China, while the impact of marketization on the industry’s performance was not significant. This study enriches relevant literature through accounting for heterogeneity in a hierarchical structure.
In their research entitled ‘Efficiency evaluation of hotel operations in Mainland China based on the superefficiency SBM model’, Deng, Gao, Liang and Morrison evaluated and compared the relative efficiency of starred hotels from a multi-scale perspective, that is, in 31 provinces and 4 regions in Mainland China from 2006 to 2016. They employed the superefficiency slacks-based measure (SBM) model taking into account two key causes of operational inefficiency including input redundancy and output shortfalls. Among the two reasons for operational inefficiency, input redundancies, especially in number of hotels, employees and rooms were found to be the primary one, which caused hotels in 20 provinces in an inefficient state in 2011 and 2016. The main findings showed that the region with the highest level of efficiency of hotel operations is Eastern China, followed by Central China and Western China, and the lowest efficiency was discovered in north-eastern China. At the provincial level, the efficiency of hotels displayed a downward trend. The total input inefficiency was the main cause of hotel inefficiency in the four regions. This article provides important and practical implications for improving efficiency in the hotel sector to policy makers and hotel managers. The authors suggested that operational and strategic changes such as adjusting input and output redundancies can improve the efficiency of hotels in the inefficient provinces of China.
China’s Belt and Road Initiative (BRI) has caught the whole world’s attention and received different types of responses from other countries, ranging from warm embracing to lukewarm suspicious to boycotting attitudes. Nevertheless, the BRI has been relentlessly promoted and implemented and the effects of BRI in the sphere of tourism also started to emerge. Huang, Han, Gong and Liu employed panel data from 2008 to 2016 and resorted to the Difference-in-Differences method to examine the policy effect of BRI on China’s inbound tourism generated by countries and regions along the Belt and Road. The empirical test results revealed a significant effect of the BRI on China’s inbound tourism. Heterogeneous effect tests showed the BRI had spurred more inbound arrivals from countries with low levels of trade openness with China and high levels of economic development.
Among one of the first attempts, Ma, Wang, Song and Liu used a time-varying parameter vector autoregressive model (TVP-VAR) to analyse the equi-spaced and time-point impulse responses between FDI and tourism development in China. They explored the relationship between the growth rate for the natural logarithm of the FDI and the growth rate for natural logarithm of foreign exchange earnings from international tourism in China using annual data from 1983 to 2017. It was found that the impact of the former on the latter was significantly higher than the impact of the latter on the former. Fluctuations were discovered between the growth rate for the natural logarithm of the FDI and the growth rate for natural logarithm of foreign exchange earnings from international tourism from 1993 to 2016, which implied a continuous long-run growth with a constant decline in the impact mechanisms. Another interesting finding of this study is that the largest impacts of international tourism on FDI was observed in 1997, which was mainly attributed to the development of inbound tourism and foreign investment due to the United Kingdom’s returning Hong Kong to China.
Chinese companies are encouraged by the government to ‘go out’ for their business expansion. The trend of the outward foreign direct investment (OFDI) taken by Chinese enterprises has been clear. An increasing number of OFDI cases would be in the broad tourism area (Li et al., 2017). In this special issue, Song, Shi, Chen, and Li tested the hypothesis of the spill-over effect of FDI. Using provincial-level panel data from 2001 to 2015, they found that China’s overall FDI inflows had a significant spill-over effect on its outward FDI in tourism. However, the relationship between tourism-related inbound FDI and tourism outward FDI can only be found when high star-rating foreign invested hotels are used as the proxy for tourism-related inbound FDI measurement.
Concluding remarks
At a time of great uncertainty created by the global trade war, we expect tourism will be subject to the impact of the global economic situation. Tourism is a strategic pillar industry in China’s economy system, and its roles in the Chinese economy in the new normal era are yet to be further revealed. The multiplicity of economic issues relating to China tourism cannot be duly captured in a special issue like this in Tourism Economics. But we hope the special issue would trigger more critical thoughts on the roles of tourism in the global economy. China, nevertheless, provides the most intriguing and dynamic context for us researchers to study a lot tourism economics issue. China’s economic system and the innovative tourism business forms and industry variations will continue to present a fertile environment for tourism economics research.
In closing, we thank the Editors of Tourism Economics, Professor Albert Assaf and Professor Raffaele Scuderi for their support and patience in the making of this special issue. We are grateful to the anonymous reviewers for contributing their precious time in the reviews. Finally, we thank the authors for their patience and hard work in revising and improving their work and tolerating the guest editor’s picky comments.