chinese tourist spending in europe

Europe will not get a boost from Chinese tourism until 2024

The world is eagerly awaiting the return of Chinese tourists since Covid-19 measures were lifted. But now that Chinese people can travel abroad again, will they be returning to Europe soon? 

Senior Economist, Services and Leisure

Chief Economist, Greater China

Chinese wanderlust on the rise

Chinese people are becoming more and more enthusiastic about travelling. This is evident from the latest Chinese traveller sentiment report from December 2022. Four in ten Chinese respondents said that they would like to go on a trip again. A year earlier, in December 2021, this applied to only two in ten Chinese. Now that Covid-19 restrictions have been fully lifted, the percentage of willing travellers is expected to increase further.

More Chinese people are eager to travel

Attitude of Chinese people towards travel

Jump in visitors from Mainland China to Hong Kong after border reopened

The increasing desire to travel among Chinese people can also be illustrated by two other factors:

• On the day China announced it was lifting all virus restrictions, the booking site Trip.com recorded the highest number of searches for international flights and accommodations in three years.
• The number of Chinese visitors from Mainland China to Hong Kong has soared. On 8 January 2023, the border between Mainland China and Hong Kong reopened. Last year there were only 370,000 visitors from Mainland China to Hong Kong. Since the reopening this year, one million people have crossed the border so far.

There has been a huge jump in Chinese visitors to Hong Kong since the border reopened

Number of visitors from Mainland China to Hong Kong (x 1,000)

European tourism still below 2019 levels

The big question is how soon will Chinese tourists return to Europe again, and what impact will that have on the European tourism industry? Tourism has been hit hard by the Covid-19 pandemic, particularly in 2020 and 2021, with the number of guests in accommodations almost halving. Despite a strong recovery in 2022, the number of tourists in the European Union reached 91% of the pre-pandemic level by the end of 2022. In Italy and Germany, in particular, there were still significantly fewer tourists in 2022 than before the pandemic. In Spain and Belgium, on the other hand, the number of tourists was close to the 2019 level.

Fewer tourists in the EU in 2022 than before the pandemic

Number of  tourists in accommodations in 2022 compared to 2019

Italy is the most popular country in the EU for Chinese visitors

The share of Chinese tourists visiting the European Union each year is marginal, at 1.3%. In 2019, 13 million Chinese tourists came to the EU. Italy is by far the most popular country for Chinese tourists, followed by Spain and Belgium. In 2019, nearly 3.2 million Chinese tourists came to the country of ‘la dolce vita’, accounting for 2.4% of all tourists that year. In the last three years, the proportion of Chinese tourists in Europe has been negligible due to Covid-19.

Share of Chinese travellers out of the total number of travellers in 2019

According to the China Outbound Tourism Research Institute, 18 million Chinese tourists will travel internationally in the first half of 2023, followed by 40 million tourists in the second half. That is about 40% of the number of travellers in 2019. Initially, Chinese people are expected to visit destinations close to home, such as Hong Kong, Macau, Thailand and Singapore. It is not expected that the number of Mainland visitors to Europe will really start to pick up until the summer. There are several reasons for this:

• Just like in the rest of the world, it will take several months for international travel to restart their operations. Not only is there a lack of capacity for international flights, resulting in high ticket prices, but Chinese travellers also face long delays in getting passports and visas.
• Many of them prefer family visits in their own country, as this has not really been possible in recent years.
• Several countries worldwide still have specific travel restrictions related to travel from China. For most European countries, for example, Chinese tourists still need a negative Covid test upon arrival.

While the return of Chinese tourists to Europe will begin around the summer of 2023, we expect the real boost for European tourism to take place in 2024.

Chinese Tourists Plan Fewer Trips to Europe in 2024

Dawit Habtemariam , Skift

February 6th, 2024 at 2:23 PM EST

European destinations need to come up with new strategies to attract Chinese tourists.

Dawit Habtemariam

Europe may not see a tourism comeback from one of its key source markets: China. Chinese interest in traveling to Europe has dropped, according to a survey released Tuesday by the European Travel Commission.

Only about 57% of Chinese tourists surveyed said they intend to travel to Europe in 2024 – that’s down from 71% in 2023, according to the European Travel Commission.

One of the drivers for the decline was a preference among Chinese to travel within Asia .  The preference comes as several Southeast Asian destinations relax their visa policies. Thailand and China, for example, agreed on a permanent visa waiver this year.  

Destinations with simplified visa procedures have a distinct advantage with Chinese tourists, said Boon Sian Chai, managing director and vice president of international markets for Trip.com, at Skift’s Global Forum East in December.

Chinese tourists also cited financial concerns and limited vacation time as why they aren’t planning to travel to Europe.

Europe Needs Tourism from China

Before the pandemic, China was a vital tourism market for multiple European destinations. For the UK and Netherlands, for example, it was a top source market.

 “China has been our most important source market from Asia and that is only at 50% of pre-Covid levels,” said Jos Vranken, managing director of Netherlands Board of Tourism and Conventions , in December.

In the UK, Chinese tourists were the second-highest spenders behind Americans before the pandemic, said VisitBritain CEO Patricia Yates.

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As one of the few registered Chinese-English tour guides in Slovenia, tour guide Luka is warming up his spoken Chinese, as droves of tourists from China are expected to arrive for the summer holidays. After three years of job switchings, he could now count on the returning Chinese tourists for a much more stable job.

BRUSSELS, April 15 (Xinhua) -- After three years of job switchings, Slovenian tour guide Luka is eagerly anticipating the arrival of the first group of tourists from China as now the situation of the COVID-19 pandemic has improved a lot.

As one of the few registered Chinese-English tour guides in Slovenia, Luka is warming up his spoken Chinese, as droves of tourists from China are expected to arrive for the summer holidays.

In 2019, 13 million Chinese tourists landed in the European Union (EU) member states, according to a report by the Brussels-based European Travel Commission (ETC).

This number has plunged since the pandemic, till the reopening of European countries and the relaxation of China's outbound travel restrictions.

At the beginning of this year, China resumed its outbound travel business. Currently, China allows group tours to 60 countries.

In late March, Hungary welcomed its first group of Chinese tourists after three pandemic years. The 22 Chinese visitors, who arrived in the country for a nine-day stay there, were greeted by Hungarian government officials at the Budapest Airport.

"This is my third visit to Hungary," said Lou Zhiyuan, 60, who flew in from China's Guangzhou city and had just retired. She signed up for the tour group immediately when the possibility opened up. She last visited Hungary eight years ago.

European tourism was badly hit by the COVID-19 pandemic and is expected to recover speedily with the return of Chinese tourists.

Chinese tourists made 22.2 million overnight stays in the EU in 2019. Due to the pandemic, this number fell to 3 million in 2020 and declined further to 1.6 million in 2021, according to the EU's statistical office Eurostat.

Before the pandemic, Croatia welcomed more than 300,000 visitors from China per year. "We will do everything in our power to facilitate the arrival and stay of Chinese tourists in Croatia," Kristjan Stanicic, director of the Croatian National Tourist Board, told Xinhua.

Direct flights between Athens and Shanghai were also launched in December 2022, after the direct flights between Athens and Beijing commenced in 2017.

"We are a Chinese-ready airport," said Ioanna Papadopoulou, director of communication and marketing at Athens International Airport (AIA), where virtual assistants help Chinese tourists with information in their own language. They can also use familiar methods of payment which they use back home at AIA's duty-free shops.

According to the ETC, Chinese tourists are still rare in France, although it was the most popular destination for them outside Asia before the pandemic.

In 2019, more than 2.4 million Chinese visited France, and Chinese tourists spent around 180 euros (199.7 U.S. dollars) per day there, the ETC said.

"We have seen a significant increase in the number of our Chinese customers," Ms. Wang, owner of the New Shanghai restaurant near the Palace of Versailles southwest of Paris, told Xinhua.

Not far away, the line of tourists waiting for entering the Palace stretches for nearly 100 meters, but only a few of them are Asian, mostly from Japan and South Korea.

"After three years of pandemic life, Chinese travel agencies have lost contact with Europe's hotels and car rental agencies. In the short term, it is difficult to return to the preferential prices we could offer them before the pandemic," Liu Yuan, a tour guide operator in France, told Xinhua.

But for Luka, at least he could count on the returning Chinese tourists for a much more stable job.

• Cultural exchanges bring Greece, China closer together: official    (2022-06-20)
• Greece counts on direct air links to boost Chinese arrivals    (2023-01-12)
• Athens Int’l Airport unveils Rabbit Mascot to celebrate Chinese New Year    (2023-01-29)
• Athens event celebrates China-CEEC cooperation    (2023-06-25)
• Greece expects more Chinese visitors with extra direct air links    (2024-03-07)
• Inter-civilization dialogue a necessity for progress of mankind, say Greek scholars    (2023-03-27)
• Kung Fu competition promotes Chinese culture in Athens    (2023-05-29)
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Return of Chinese tourists helps vitalize Europe's tourism market, economy

Deepening tourism cooperation between China and Europe will help vitalize the continent's economy, as tourism is one of its pillar industries.

Figures from travel agencies show that tour products to Europe have become hot sellers since early 2023 after China loosened outbound travel restrictions following the pandemic.

Traditionally popular European destinations such as France, Spain and Greece remain top choices for Chinese travelers, while "niche "destinations like Serbia and Montenegro have also become trendy.

"Some European destinations including Athens, Berlin, Milan and Zurich have seen an upsurge in searches on our platform recently," said online travel agency Qunar.

For example, from April 22 to 28, searches for tour products to Athens nearly tripled, while searches for Berlin-related products almost quadrupled compared with the previous week.

Qi Chunguang, vice-president of Tuniu, said that destinations in Central and Eastern Europe have also lured more Chinese travelers because of lower costs and more friendly visa policies.

"A continuous trip to Austria, Czech Republic and Hungary usually costs 25,000 yuan ($3,500) to 30,000 yuan per person during summer time, while a trip to the United Kingdom and Ireland costs nearly 40,000 yuan per person over the summer," he said. "Also, adding direct flights from China to destinations in Eastern Europe and more convenient visa application procedures make Central and Eastern Europe more attractive."

Tourism industry insiders said that Europe delights in seeing more Chinese travelers, who will inject life into the continent's economy and help boost tourism-related employment.

Data analysis company Statista — founded in Hamburg, Germany — said the total contribution of travel and tourism to Europe's GDP was around $2.1 trillion in 2019, the year before the pandemic hit, while that dropped to around $1.9 trillion in 2022.

Travel and tourism account for a great share of some economies in Europe — for example, 24.8 percent of Croatia's GDP came from travel and tourism in 2019, according to Statista.

Sandra Carvao, chief of tourism market intelligence and competitiveness at the World Tourism Organization, told People's Daily in a recent interview that China is one of the world's largest sources of travelers, so the recovery of China's tourism market is key to Europe's tourism industry development.

Eduardo Santander, executive director of the European Travel Commission, told People's Daily that destinations in Europe have made great efforts to attract Chinese travelers, such as deepening cooperation with China's airline companies and organizing tourism exhibitions in China.

He said China had been the second largest source of travelers to Europe before the pandemic, and he hopes to see a growing number of Chinese travelers come to the continent this year.

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Tourism statistics - EU and China

Data extracted in February 2018

No planned article update

China was the 8th most popular non-EU destination for EU residents in 2016.

Over the last 10 years, the number of nights spent in the EU by tourists from China more than tripled, reaching nearly 25 million nights in 2016.

Nights spent by Chinese tourists of the total nights spent by guests from outside the EU, 2016 (%)

• Source: Eurostat (tour_occ_ninraw)

On 12 July 2016 the President of the European Commission, Jean-Claude Juncker, and the Chinese Prime Minister, Li Keqiang, announced that 2018 will be the EU-China Tourism Year (ECTY) . This initiative provides ‘a unique opportunity to increase visitors’ flows and investments on both sides’ (Elżbieta Bieńkowska, European Commissioner responsible for tourism — ‘European Tourism Forum’ in Bratislava on 11 October 2016).

This article takes a look at tourism flows between the European Union (EU) and China. The first section focuses on visits to Asia, and in particular China, made by EU residents . The second looks at visits made by Chinese residents to the EU using accommodation statistics (nights spent in rented tourist accommodation).

Full article

Asia is the second most visited destination outside europe for eu residents.

Europe — and very often a tourist’s own country of residence — remained the most attractive destination for most trips made by Europeans. It accounted for 86.0 % of the total number of trips made in 2016 (see Figure 1). The top continent visited outside Europe was America with 5.7 % of total trips, followed by Asia with 4.9 %.

Figure 2 takes a closer look at trips made outside the EU. Trips to other destinations in Europe — such as Turkey, Switzerland, Norway, Russia and all other non-EU European countries — made up the largest share (38 %). Nonetheless Asia accounted for more than one in five trips outside the EU (22 %). When measured in terms of nights spent and expenditure, Asia’s share of all non-EU tourism increases to 29 % and 28 % respectively. EU residents made 15.2 million trips to Asia — representing a total of 263.5 million nights — and spent EUR 25.5 billion on those trips. A part of the EUR 25.5 billion spent stayed within the EU economy, for instance for intercontinental flights operated by European airlines or commission fees charged by European travel agencies.

China is the 8 th most popular non-EU destination for EU residents

China is becoming a popular travel destination for Europeans. In 2016, China ranked number 8 among non-EU destinations (see Figure 3 and Table 1). The United States was the most popular non-EU destination, followed by countries neighbouring the EU (Turkey, Switzerland, Norway and Russia).

Two Asian countries — Thailand and the United Arab Emirates (each of them representing just above 3.0% of EU residents' trips to non-EU destinations) — were still slightly ahead of China (3.0 %) in 2016. EU residents made 2.1 million trips to China in 2016, and stayed on average 15.6 nights. Total spending on trips with China as main destination was EUR 5.1 billion (China climbed to third place in expenditure terms — see Table 1).

In the five year period 2012—2016, the number of trips by EU residents to China increased by 16 % (data based on 20 countries, which account for 76 % of the trips made by EU residents).

Tourism from China to the EU has tripled in ten years

The number of nights spent in the EU by tourists from China has more than tripled over the last ten years, reaching nearly 25 million nights in 2016. Tourism from China has risen more than that from other major non-EU countries such as the United States, Russia or Brazil (see Figure 4).

Figure 5 shows that the overwhelming majority of foreigners staying in tourist accommodation establishments in EU countries came from other EU countries (72 %) or other European countries (9 %). Of non- European tourists, those from Asia accounted for the biggest share of nights spent (8 %).

1.7 % of all nights spent in EU-28 countries by non-residents was by tourists from China; for Finland the share was nearly 5 % (see Figure 6).

The share of Chinese tourists out of the total nights spent by tourists coming from outside the EU was almost 6 % (see Figure 7). Luxembourg was very popular among Chinese tourists; 1 in 8 nights spent by non-EU tourists in Luxembourg, was spent by a Chinese tourist.

Tourists from China mainly stayed in just four EU countries: more than 7 out of 10 overnight stays by tourists from China to the EU were in the United Kingdom (31 %), Italy (18 %), France (13 %) and Germany (10 %) (see Figure 8).

The EU is a net exporter of travel services to China

In 2016, the EU exported travel services valued at nearly EUR 7 billion [1] . In the same year, the EU imported nearly EUR 3 billion from China (i.e. Europeans’ spending on trips in China). Europe was a net exporter of travel services with a positive balance of EUR 4 billion.

Until 2008 (see Figure 9) the travel item showed a negative balance in the EU’s balance of payments with China, with debits exceeding credits.

The growth rates of the monetary flows (credits and debits) were in line with the underlying physical flows of Chinese tourists staying in European accommodation and EU tourists making trips to China respectively (see above).

Source data for tables and graphs

Data sources

This article is an analysis of harmonised data collected by the Member States in the frame of the Regulation (EU) No 692/2011 of the European Parliament and of the Council concerning European statistics on tourism .

Tourism, in a statistical context, refers to the activity of visitors taking a trip to a destination outside their usual environment, for less than a year. It can be for any main purpose, including business, leisure or other personal reasons other than to be employed by a resident person, household or enterprise in the place visited.

Tourism statistics in the EU consist of two main components: on the one hand, statistics relating to capacity and occupancy of collective tourist accommodation; on the other, statistics relating to tourism demand. In most EU Member States, the former are collected via surveys filled in by accommodation establishments, while the latter are mainly collected via traveller surveys at border crossings or through household surveys.

EU-China Tourism Year (ECTY) was launched in Venice on 19 January 2018. This initiative, agreed at the 2017 EU China Summit, aims at supporting the development of new and better travel itineraries, promoting inter-cultural understanding, and enhancing travel and tourism experiences, including greater promotion and more sustainable tourism.

According to a United Nations World Tourism Organisation (UNWTO) publication titled ‘ Tourism highlights ’, the EU is a major tourist destination, with five of its Member States among the world’s top 10 destinations in 2016. According to this publication, China continues to consolidate its position as the world’s largest travel market in terms of both outbound travel and expenditure.

Tourism has the potential to contribute towards employment and economic growth, as well as to development in rural, peripheral or less-developed areas. These characteristics drive the demand for reliable and harmonised statistics within this field, as well as within the wider context of regional policy and sustainable development policy areas.

Tourism can play a significant role in the development of European regions. Infrastructure created for tourism purposes contributes to local development, while jobs that are created or maintained can help counteract industrial or rural decline. Sustainable tourism involves the preservation and enhancement of cultural and natural heritage, ranging from the arts to local gastronomy or the preservation of biodiversity .

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The Complete Guide to Winning Over Chinese Tourists in Europe

Locaria > Insights > Blog > Company > The Complete Guide to Winning Over Chinese Tourists in Europe

Tuesday November 26, 2019 - Posted by: Sarah Wang

Over the past decade, there has been an increase in Chinese tourism to the West. After Asia, Europe is the second most popular continent for Chinese tourists to visit, with France leading the way as the top holiday destination for Chinese travellers.

As tourism from China continues to increase, we wanted to explore why Chinese tourists are choosing Europe as a prime holiday destination and how brands can appeal to Chinese holiday-makers.

What’s driving the growth in Chinese tourism to Europe?

This growth in tourism from China is primarily driven by its booming economy and the exponential increase in the spending power of the Chinese middle-class. In 2002, China’s middle-class comprised only 4% of its population, whereas they made up over 30% in 2018 . The nation’s middle-class is set to further expand from 430 million people to 780 million in the mid-2020s. Urban households in China (where most of the middle class is concentrated), spend about 20 trillion yuan annually (just over $2.8 trillion in dollars), almost equivalent to the average spend of a Japanese household.

Along with this explosion in the middle class’ purchasing power, the Chinese appetite for foreign travel is growing. According to a Mintel study,  81 per cent of Chinese consumers show an interest in fresh experiences , such as buying a product they have never bought before or travelling to a new holiday destination.

Granted, overall only 10% of people in China own passports which is low in comparison to other countries . But in a country with 1.4 billion people, in absolute numbers, this is a huge market. It is predicted that by 2020 there will be 240 million passport holders and 220 million Chinese people travelling worldwide, which presents lucrative prospects for foreign countries trying to appeal to Chinese spenders.

European governments are keen to capitalise on the boost that Chinese tourism could give their economies, with the European Commission and European Travel Commission co-launching the 2018 EU-China Tourism Year to promote Europe as a holiday destination. In 2018 more than 2.8 million Schengen visas were issued to Chinese tourists to travel to Europe.

How Chinese tourists spend their money

Looking at spending, more recently, China overtook America for total tourist spending . To compare how fast Chinese tourism has grown worldwide, in the year 2000 Chinese tourists only spent $10 billion overseas and in comparison, by 2018, Chinese tourists spent $277.3 billion overseas .

Culturally, Chinese tourists differ from Western tourists in that they mostly travel in groups to discover Europe, generally visiting three or four countries per stay. Although individual travels and customised itineraries are increasing, 42% of Chinese travellers to Britain were part of a tour group. Most Chinese tourists stayed in the UK for between eight to ten days and spent roughly 10,000 yuan ($1,589) each while in the country. Across the pond in America, the Chinese make up the fifth-largest bloc of tourists visiting the USA and tend to spend an average of $7,000 per trip , which is about 50% more than the average international traveller to USA.

As we outlined before , Chinese consumers are increasingly seeking out “richer experiences and quality of life.”  Luxury retailers relying on tourist spending are benefiting significantly from the boom in Chinese tourism, as Chinese tourists spend most of their travel budget on shopping, followed by accommodation and catering.

How brands can attract Chinese tourists

If a brand wants to succeed in China, it cannot adopt a one size fits all approach and must factor in specific cultural and market nuances.

Chinese consumers are “ very much content-driven ” and more likely to follow and engage with brands whose content demonstrates values and beliefs that resonate with Chinese consumers and understand their expectations. For instance, when localising into China, businesses need to consider how things such as their brand names or general marketing content will translate into copy that will not only work in the Chinese language but across local dialects as well.

Brands should look beyond direct translations of copy into Mandarin or Cantonese and focus on localisation. Retailers need to research the target audience and invest in expert services to ensure the content is fully relevant and appropriate. Chinese consumers are more likely to connect with retailers that present a compelling brand message and provides content that elicits an emotional reaction. 

Brands need to consider that in China, the digital channels and platforms used to connect with their customers are completely different from those in the West. Google, Facebook, Twitter and YouTube are all blocked,  and consumers in China generally use Baidu for web search, WeChat and Weibo for social media, and Youku for video. European businesses need to use these platforms to attract  Chinese customers.

Many retailers are also expanding their point of sale and payment options to include Chinese mobile payment apps like Alipay and Wechat Pay to accommodate for Chinese spending habits.

Chinese tourism looks set to significantly increase in the next decade, which holds enormous potential for European business. China is a unique market that presents its own set of challenges to consider, but marketing to Chinese tourists could prove to be highly lucrative.

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How to capture the spend of returning Chinese tourists

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Before the Covid outbreak, tourists from Mainland China took 155 million outbound trips in 2019 with a total travel expenditure of $255 billion. This made China the largest outbound travel market in the world. Since the easing of travel restrictions in January 2023, the global economy — including the luxury industry — has been eagerly awaiting their return.

There are positive signs. The China Tourism Academy projects that China’s outbound travel will total around 130 million trips this year — up on last year’s estimated 87 million. Chinese consumers spent $168 billion during outbound trips in 2023, a white paper by market research firm IClick estimates, which is approximately two-thirds of pre-pandemic levels. Meanwhile, the volume of visa applications from China is expected to rebound to 70 per cent of pre-pandemic levels in 2024, according to technology provider VFS Global.

Barriers remain, however, including visa complications and a reduction in flight routes. Europe also faces stiff competition from other countries in Asia, particularly Japan — as well as from China itself, which is vying for more luxury spend from its citizens. For European brands, there are several possible strategies to adopt: open stores in Chinese tourist hotspots around the world, double down on drawing returning Chinese tourists into stores in Europe, and/or invest in expanding across China to capture the domestic tourist.

“While spending on luxury goods in China may be close to flat this year, Chinese consumers are significantly increasing their luxury expenditures abroad, and therefore increasing their share in the global market,” says Jacques Roizen, managing director of consulting at DLG Shanghai.

A Euro summer?

Before the pandemic, the top outbound destinations for Chinese tourists were Asian countries like Thailand, Japan, Korea and Singapore, according to data from the China Tourism Academy. Online travel booking companies show these countries have largely regained their popularity. “Factors like economic uncertainties, geopolitical tensions and visa issues means many [Chinese] travellers tend to stay closer to home,” says Prudence Lai, research consultant at Euromonitor.

However, Chinese online travel platform Fliggy also notes a surge in appetite for long-distance locations including Europe this summer. Countries requiring long-haul flights — such as the US, the UK and France — accounted for half of the top outbound travel destinations by transaction volume during Fliggy’s promotional event for China’s national 618 shopping festival . Chinese travel site Qunar says the number of customers opting for long-haul outbound tours beyond East and Southeast Asia last year was up 42.8 per cent on 2019 levels. “There is a polarisation among Mainland Chinese outbound travellers. High-net-worth individuals are keen to travel abroad even to long-haul markets such as North America and Europe, picking up their habits from before the pandemic and enjoying a premium outbound travel experience,” Lai continues.

Trip.com confirms a “significant increase” (double-digit growth) in bookings across Europe among Chinese travellers. Jane McFadzean, senior director of destination marketing at Trip.com, reports a 105 per cent surge in bookings for Paris between 25 July and 1 August compared with the same period last year. And these tourists are splashing out: “Chinese tourists are showing a taste for luxury… The average spending per Chinese traveller has risen by 65 per cent with an increase in five-star hotel bookings from the previous year,” says McFadzean.

Large-scale sporting events like the Euros and the Paris Olympics are having a noticeable effect. “Sustained interest in sports and the outdoors post-pandemic has meant that consumers [in China] are becoming more adventurous and more willing to spend on sports-driven travel,” says Rohini Wahi, APAC senior insight strategist at WGSN. European luxury brands have been targeting Chinese sports fans through sponsorships, endorsements and campaigns starring athletes. Tiffany, for example, released a campaign earlier this year starring Chinese skier Eileen Gu, while Boss has recently partnered with swimmer Wang Shun.

Miranda Yuan, marketing strategy manager at agency Tong — who is helping a luxury client with a targeted influencer campaign focused on Chinese luxury travellers in Europe this summer — points out that a number of local food and beverage brands are also taking advantage of the travelling consumer in Paris. Popular tea brand Heytea opened a pop-up store in the city on 5 July with the aim of “connecting with drinks for those who go there to watch the Olympics”. “It’s a perfect time for luxury brands to create tailored marketing campaigns to engage with Chinese luxury travellers before and during their travels,” Yuan advises.

Many brands and retailers are creating offers that specifically cater to Chinese customers, according to Tong, such as French department store Galeries Lafayette’s selection of Asian restaurants as well as its dedicated space for tax refunds. “I think we’re going to see a lot more product brands think about how to partner with experiential brands (destinations, food and beverage locations, fine dining, hotels, outdoor experiences etc) as the experience economy continues to grow. Aligning with complimentary brands is going to have to be a focus now to reach the pockets of growth that are out there,” says Tong commercial director Jack Porteous.

Other hotspots for Chinese spend

While Europe’s sporting summer is helping it climb back up the ranks as a destination for Chinese travellers, it is facing stiff competition. Countries and neighbouring regions like Hong Kong, Thailand and Japan are experiencing a boom in Chinese tourism, thanks to factors such as favourable exchange rates, product availability and tax-free shopping.

International traveller Leo Huang has been abroad four times since the borders reopened in January 2023 including Thailand (twice), Japan, and most recently for a “grand tour” around Italy. He, like his contemporaries, are availing of a number of factors like price disparity and product availability — especially in Japan. “Japan has been a cheap destination for all tourists since the devaluation of the yen last year. Middle-class Chinese travel to Japan for luxury goods shopping for 30 per cent off. Depending on what you buy, it might easily cover your week-long stay including the airfares,” says Huang.

LVMH reported a 32 per cent surge in sales in Japan in the first quarter of this year, which it put down to the return of the Chinese consumer. Tiffany, Balenciaga, Hermès and Prada Group also reported substantial sales growth, prompting expansions and new store openings in the country.

Chinese travellers are choosing “a wider range of geographies, including domestic destinations and newer overseas markets”, says Zarina Kanji, managing director of the UK and Europe at digital marketing agency WPIC Marketing + Technologies. She suggests that European brands hoping to draw their spend need to “adjust their inventory management, store design and marketing accordingly”. Almost half (48 per cent) of Chinese consumers surveyed by Mintel in April 2024 said a good, offline service experience is the top factor that would make them spend with a luxury brand. “In addition to this, we find that offering new lifestyle services is also an opportunity point; cafés, restaurants, and even hotels, opened by luxury brands have become entry points for attracting consumers to check in or experience a luxurious lifestyle,” explains Mintel senior analyst Blair Zhang.

“Luxury brands must pivot to offering bespoke travel experiences that cater to a desire for self-contentment and exploration,” adds Fflur Roberts, head of luxury goods at Euromonitor, noting a shift towards a desire for “personal fulfilment and enrichment” through travel.

Attracting the domestic tourist

Many Chinese consumers are continuing to choose staycations, drawn by newly developed or upgraded locations that offer recreational activities such as skiing, or leisure destinations like beaches. “Provided that China has diverse domestic travel destinations — for example, shopping in Hainan island, food travel in Chongqing and cultural activities such as camel riding in Dunhuang — domestic travel is an attractive, value-for-money substitute to international travel,” says Lai.

Spending per domestic tourist on the tax-free island of Hainan in 2023 has surpassed pre‑pandemic levels. “By the end of 2023, Mainland China accounted for over half of all global duty-free spending and these areas are expected to remain top shopping hotspots,” says Roberts.

However, DLG’s Roizen points to a “noticeable decline” in the Hainan province this year, “largely due to the fact that many Chinese luxury consumers, who were previously limited to Hainan as their sole duty-free destination during the pandemic, now have greater freedom to travel abroad and access a wider range of luxury offerings globally”. He adds: “As a result, while overall consumer spending on experiences remains strong, the average spend on luxury goods has declined, as these affluent travellers are no longer confined to the Hainan market.”

Brands like Loewe, Gucci, Louis Vuitton and Tiffany are continuing to invest in Greater China, including via large-scale exhibitions and exclusive VIP events. Chanel recently announced a runway show in Hangzhou this December. Roizen sums up: “Leading luxury houses recognise that while the countries where Chinese consumption is taking place might be shifting, they are doubling down on investments in China, because they understand that regardless of the purchase location they choose, Chinese consumers remain one of the most promising sources of growth.”

Comments, questions or feedback? Email us at [email protected] .

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Now boarding: Faces, places, and trends shaping tourism in 2024

After falling by 75 percent in 2020, travel is on its way to a full recovery by the end of 2024. Domestic travel is expected to grow 3 percent annually and reach 19 billion lodging nights per year by 2030. 1 Unless otherwise noted, the source for all data and projections is Oxford Economics. Over the same time frame, international travel should likewise ramp up to its historical average of nine billion nights. Spending on travel is expected to follow a similar trajectory, with an estimated $8.6 trillion in traveler outlays in 2024, representing roughly 9 percent of this year’s global GDP.

About the authors

This article is a collaborative effort by Caroline Tufft , Margaux Constantin , Matteo Pacca , and Ryan Mann , with Ivan Gladstone and Jasperina de Vries, representing views from McKinsey’s Travel, Logistics & Infrastructure Practice.

There’s no doubt people still love to travel and will continue to seek new experiences in new places. But where will travelers come from, and where will they go? We developed a snapshot of current traveler flows, along with estimates for growth through 2030. For the purposes of this report, we have divided the world into four regions—the Americas, Asia, Europe, and the Middle East and Africa.

Our analysis identifies three major themes for industry stakeholders to consider:

• The bulk of travel spending is close to home. Stakeholders should ensure they capture the full potential of domestic travel before shifting their focus to international travelers. And they should start with international travelers who visit nearby countries—as intraregional trips represent the largest travel segment after domestic trips.
• Source markets are shifting. Although established source markets continue to anchor global travel, Eastern Europe, India, and Southeast Asia are all becoming fast-growing sources of outbound tourism.
• The destinations of the future may not be the ones you imagine. Alongside enduring favorites, places that weren’t on many tourists’ maps are finding clever ways to lure international travelers and establish themselves as desirable destinations.

The bulk of travel spending is close to home

International travel might feel more glamorous, but tourism players should not forget that domestic travel still represents the bulk of the market, accounting for 75 percent of global travel spending (Exhibit 1). Domestic travel recovered from the COVID-19 pandemic faster than international travel, as is typical coming out of downturns. And although there has been a recent boom in “revenge travel,” with travelers prioritizing international trips that were delayed by the pandemic, a return to prepandemic norms, in which domestic travel represents 70 percent of spending, is expected by 2030.

The United States is the world’s largest domestic travel market at $1 trillion in annual spending. Sixty-eight percent of all trips that start in the United States remain within its borders. Domestic demand has softened slightly, as American travelers return abroad. 2 Dawit Habtemariam, “Domestic U.S. tourism growth levels off as Americans head overseas,” Skift, August 18, 2023. But tourism players with the right offerings are still thriving: five national parks broke attendance records in 2023 (including Joshua Tree National Park, which capitalized on growing interest from stargazers indulging in “dark sky” tourism 3 Scott McConkey, “5 national parks set attendance records in 2023, and the reasons may surprise you,” Wealth of Geeks, April 16, 2024. ).

China’s $744 billion domestic travel market is currently the world’s second largest. Chinese travelers spent the pandemic learning to appreciate the diversity of experiences on offer within their own country. Even as borders open back up, Chinese travelers are staying close to home. And domestic destinations are benefiting: for example, Changchun (home to the Changchun Ice and Snow Festival) realized 160 percent year-on-year growth in visitors in 2023. 4 Shi Xiaoji, “Why don’t Chinese people like to travel abroad anymore? The global tourism industry has lost 900 billion yuan. What is the situation?,” NetEase, February 12, 2024. In 2024, domestic travel during Lunar New Year exceeded prepandemic levels by 19 percent.

China’s domestic travel market is expected to grow 12 percent annually and overtake the United States’ to become the world’s largest by 2030. Hotel construction reflects this expectation: 30 percent of the global hotel construction pipeline is currently concentrated in China. The pipeline is heavily skewed toward luxury properties, with more than twice as many luxury hotels under construction in China as in the United States.

India, currently the world’s sixth-largest domestic travel market by spending, is another thriving area for domestic travel. With the subcontinent’s growing middle class powering travel spending growth of roughly 9 percent per year, India’s domestic market could overtake Japan’s and Mexico’s to become the world’s fourth largest by 2030. Domestic air passenger traffic in India is projected to double by 2030, 5 Murali Krishnan, “Can India’s airports cope with rapid passenger growth?,” Deutsche Welle, February 7, 2024. boosted in part by a state-subsidized initiative that aims to connect underserved domestic airports. 6 “India is seeing a massive aviation boom,” Economist , November 23, 2023.

When travelers do go abroad, they often stay close to home (Exhibit 2).

Europe and Asia, in particular, demonstrate strong and growing intraregional travel markets.

Recognizing this general trend, stakeholders have been funneling investment toward regional tourism destinations. An Emirati wealth fund, for instance, has announced its intent to invest roughly $35 billion into established hospitality properties and development opportunities in Egypt. 7 Michael Gunn and Mirette Magdy, “UAE’s $35 billion Egypt deal marks Gulf powers’ buying spree,” Bloomberg, April 27, 2024.

Europe has long played host to a high share of intraregional travel. Seventy percent of its travelers’ international trips stay within the region. Europe’s most popular destinations for intraregional travelers are perennial warm-weather favorites—Spain (18 percent), Italy (10 percent), and France (8 percent)—with limited change to these preferences expected between now and 2030.

Despite longer travel distances between Asian countries, Asia’s intraregional travel market is beginning to resemble Europe’s. Intraregional travel currently accounts for about 60 percent of international trips in Asia—a share expected to climb to 64 percent by 2030. As in Europe in past decades, Asian intraregional travel is benefiting from diminishing visa barriers and the development of a low-cost, regional flight network.

Thailand is projected to enjoy continued, growing popularity with Asian travelers. Thailand waived visa requirements for Chinese tourists in 2023 and plans to do the same for Indian tourists starting in 2024. It has aggressively targeted the fast-growing Indian traveler segment, launching more than 50 marketing campaigns directed at Indians over the past decade. The investment may be paying off: Bangkok recently overtook Dubai as the most popular city destination for Indian tourists. 8 “Bangkok overtakes Dubai as top destination for Indians post visa relaxation, reveals Agoda,” PR Newswire, January 18, 2024.

A McKinsey ConsumerWise survey on consumer sentiment, conducted in February 2024, suggests that Chinese travelers are also exhibiting high interest in international travel, with 36 percent of survey respondents indicating that they intend to spend more on international travel in the next three months. 9 Daniel Zipser, “ China brief: Consumers are spending again (outside of China) ,” McKinsey, April 8, 2024. Much of this interest is directed toward regional destinations such as Southeast Asia and Japan, with interest in travel to Europe down from previous years. 10 Guang Chen, Zi Chen, Steve Saxon, and Jackey Yu, “ Outlook for China tourism 2023: Light at the end of the tunnel ,” McKinsey, May 9, 2023.

Given travelers’ preference for proximity, how can tourism stakeholders further capitalize on domestic and intraregional travel demand? Here are a few strategies:

• Craft offerings that encourage domestic tourists to rediscover local gems. Destinations, hotels, and transportation providers can encourage domestic tourists to integrate lesser-known cultural landmarks into their trips to visit friends and relatives. In France, the upscale hotel chain Relais & Châteaux markets historic properties that lie far from classic tourist sights—such as Château Saint-Jean in rural Auvergne—as a welcome escape from the bustle of Paris. In Mexico, the Pueblos Mágicos program has successfully boosted domestic tourist visits to a set of “magical towns” that showcase Mexican heritage.
• Fold one-off domestic destinations into fuller itineraries. Route 66 in the United States is a classic road trip pathway, which spurs visits to attractions all along the highway’s length. Tourism stakeholders can collaborate to create similar types of domestic itineraries around the world. For instance, Mexico has expanded on its Pueblos Mágicos concept by branding coordinated visits to multiple villages as “magical routes.” In France, local tourism boards and vineyards have collaborated to promote bucket list “wine routes” around the country.
• Make crossing borders into neighboring countries seamless. Removing logistical barriers to travel can nudge tourists to upgrade a one-off trip to a single attraction into a bucket list journey across multiple, less-trodden destinations. In Africa, for example, Ethiopian Airlines is facilitating cross-border travel to major regional tourist sites through improved air connectivity. In Asia, Thailand has announced its intent to create a joint visa easing travel among Cambodia, Laos, Malaysia, Myanmar, Thailand, and Vietnam.

Source markets are shifting

The United States, Germany, the United Kingdom, China, and France remain the world’s five largest sources of travelers, in that order. These countries collectively accounted for 38 percent of international travel spending in 2023 and are expected to remain the top five source markets through 2030. But interest in travel is blossoming in other parts of the world—causing a shift in the balance of outbound travel flows (Exhibit 3).

North Americans’ travel spending is projected to hold steady at roughly 3 percent annual growth. US consumers voice growing concerns about inflation, and the most cost-constrained traveler segments are reducing travel, which is affecting ultra-low-cost airlines and budget hotels. Most travelers, however, plan to continue traveling: McKinsey research suggests that American consumers rank international and domestic travel as their highest-priority areas for discretionary spending. Instead of canceling their trips, these consumers are adapting their behavior by traveling during off-peak periods or booking travel further in advance. Travel spending by Europeans paints a slightly rosier picture, with roughly 5 percent projected annual growth. Meanwhile, the projected 12 percent annual growth in Chinese travelers’ spending should anchor substantial increases in travel spending across Northeast Asia.

Alongside these enduring traveler segments, new groups of travelers are emerging. Eastern Europe, India, and Southeast Asia are still comparatively small source markets, but they are developing fast-growing pools of first-time tourists (Exhibit 4).

India’s breakneck GDP growth of 6 percent year over year is bolstering a new generation of travelers, 11 Benjamin Laker, “India will grow to become the world’s third-largest economy by 2027,” Forbes , February 23, 2024. resulting in a projected annual growth in travel spending of 9 percent between now and 2030. Indian air carriers and lodging companies are making substantial investments to meet projected demand. Budget airline IndiGo placed the largest aircraft order in commercial aviation history in 2023, when it pledged to buy 500 Airbus A320 planes 12 Anna Cooban, “Biggest plane deal in history: Airbus clinches massive order from India’s IndiGo,” CNN, June 19, 2023. ; that same week, Air India nearly equaled IndiGo’s order size with purchase agreements for 250 Airbus and 220 Boeing jets. IndiGo later added an order for 30 additional Airbus A350 planes, well suited to serving both domestic and international routes. 13 “Airbus confirms IndiGo's A350 aircraft order,” Economic Times , May 6, 2024. The Indian Hotels Company Limited is ramping up its hotel pipeline, aiming to open two new hotels per month in the near future. International players are not sitting on the sidelines: seven hotel chains are launching new brands in India in 2024, 14 Peden Doma Bhutia, “Indian Hotels expansion plans: 2 new brands launching, 2 hotels opening every month,” Skift, February 2, 2024. including Marriott’s first Moxy- and Tribute-branded hotels in India and entrants from Hilton’s Curio and Tapestry brands. 15 Forum Gandhi, “Check-in frenzy: International hotel giants unleash fresh brands in India’s booming hospitality landscape,” Hindu Businessline , February 13, 2024. Development focus has shifted away from major metropolises such as Mumbai and Delhi and toward fast-developing, smaller cities such as Chandigarh and Hyderabad.

Southeast Asian travel spending is projected to grow at roughly 7 percent per year. Pockets of particularly high growth exist in Cambodia, Malaysia, and the Philippines. To capitalize on this blossoming source market, neighboring countries are rolling out attractive visa arrangements: for example, China has agreed to reciprocal visa waivers for short-term travelers from Malaysia, Singapore, and Thailand. 16 Julienna Law, “China launches ‘visa-free era’ with Southeast Asia. Will travel retail boom?,” Jing Daily , January 30, 2024.

Travel spending by Eastern Europeans is expected to grow at 7 percent per year until 2030—two percentage points higher than spending by Western Europeans. Areas of especially high growth include the Czech Republic, Hungary, and Poland, where middle-class travelers are increasingly venturing farther afield. Major tourism players, including the TUI Group, have tapped into these new source markets by offering charter flights to warm-weather destinations such as Egypt. 17 Hildbrandt von Klaus, “TUI develops Czech Republic as a new source market,” FVW, December 22, 2023.

Although the number of travelers from these new source markets is growing, their purchasing power remains relatively limited. Compared with Western European travelers (who average $159 per night in total travel spending), South Asians spend 20 percent less, Eastern Europeans spend 40 percent less, and Southeast Asians spend 55 percent less. Only 3 percent of the current Asian hotel construction pipeline caters to economy travelers, suggesting a potential supply gap of rooms that could appeal to budget-constrained tourists.

While acknowledging that historical source markets will continue to constitute the bulk of travel spending, tourism players can consider actions such as these to capitalize on growing travel demand from newer markets:

• Reduce obstacles to travel. Countries can look for ways to strategically invest in simplifying travel for visitors from growing source markets. In 2017, for example, Azerbaijan introduced express processing of electronic visas for Indian visitors; annual arrivals from India increased fivefold in two years. Requirements regarding passport photocopies or in-person check-ins can similarly be assessed with an eye toward reducing red tape for travelers.
• Use culturally relevant marketing channels to reach new demographics. Unique, thoughtful marketing strategies can help destinations place themselves on first-time travelers’ bucket lists. For example, after the release of Zindagi Na Milegi Dobara , a popular Bollywood movie shot in Spain with support from the Spanish Ministry of Tourism, Indian tourism to Spain increased by 65 percent. 18 “ Zindagi Na Milegi Dobara part of syllabus in Spain colleges,” India Today , June 6, 2004.
• Give new travelers the tech they expect. Travelers from newer source markets often have access to tech-forward travel offerings. For example, Indian travelers can travel anywhere within their country without physical identification, thanks to the Digi Yatra app. The Southeast Asian rideshare app Grab has several helpful travel features that competitors lack, such as automated menu translation and currency conversion. Tourism stakeholders should consider how to adapt to the tech expectations of newer travelers, integrating relevant offerings that ease journeys.
• Create vibrant experiences tailored to different price points. Crafting lower-budget offerings for more cost-constrained travelers doesn’t need to result in giving them a subpar experience. Capsule hotels, in which guests sleep in small cubbies, began as a response to the high cost of accommodations in Japan, but they have become an attraction in their own right—appearing on many must-do lists. 19 Philip Tang, “24 of the best experiences in Japan,” Lonely Planet, March 23, 2024.

The places you’ll go: The destinations of the future may not be the ones you imagine

The world’s top ten destination countries (the United States, Spain, China, France, Saudi Arabia, Türkiye, Italy, Thailand, Japan, and India, in that order) currently receive 45 percent of all travel spending, including for domestic travel. But some new locales are gaining traction (Exhibit 5).

A significant number of travelers are expanding their horizons, booking journeys to less visited countries that are near to old standbys. For instance, Laos and Malaysia, which both border Thailand—an established destination that is home to Bangkok, the world’s most visited city 20 Katherine LaGrave, “This is the world’s most visited city,” AFAR , January 31, 2024. —are up a respective 20 percent and 17 percent, respectively, in year-over-year international travel spending.

The world’s top ten destination countries currently receive 45 percent of all travel spending, including domestic-travel spending. But some new locales are gaining traction.

Several other countries that have crafted thoughtful tourism demand generation strategies—such as Peru, the Philippines, Rwanda, and Vietnam—are also expected to reap benefits in the coming years. Vietnam logged a remarkable 40 percent increase in tourism spending in the five years before the pandemic. Postpandemic, it has rebounded in part by waiving visa requirements for European travelers (while indicating intent to offer similar exemptions in the future for Chinese and Indian travelers). 21 Ashvita Singh, “Vietnam looks to offer visa-free entry to Indians: India report,” Skift, November 20, 2023. The Philippines has made a concerted effort to shift its sun-and-beach branding toward a more well-rounded image, replacing its long-standing “It’s more fun in the Philippines” tourism slogan with “Love the Philippines.” Peru is highlighting less visited archeological sites while also marketing itself as a top-notch culinary destination through the promotion of Peruvian restaurants abroad. Rwanda is investing in infrastructure to become a major African transit hub, facilitated by Qatar Airways’ purchase of a 60 percent stake in the country’s major airport. 22 Dylan Cresswell, “Rwanda plots ambitious tourism recovery,” African Business , July 28, 2022. Rwanda has also successfully capitalized on sustainable tourism: by charging $1,500 per gorilla trekking permit, for instance, it has maximized revenue while reducing environmental impact.

Tourism players might consider taking some of these actions to lure tourists to less familiar destinations:

• Collaborate across the tourism ecosystem. Promotion is not solely the domain of destination marketing organizations. Accommodation, transportation, and experience providers can also play important roles. In Singapore, for instance, the luxury resort Marina Bay Sands partners extensively with Singapore Airlines and the Singapore Tourism Board to offer compelling tourism offerings. Past collaborations have included flight and stay packages built around culinary festivals. 23 “Singapore Tourism Board, Marina Bay Sands & UOB partner to enliven Marina Bay precinct,” Singapore Tourism Board news release, January 25, 2024.
• Use infrastructure linkage to promote new destinations. By extending route options, transportation providers can encourage visitors to create itineraries that combine familiar destinations with new attractions. In Asia, Thailand’s tourism authority has attempted to nudge visitors away from the most heavily trafficked parts of the country, such as Bangkok and Phuket, and toward less popular destinations.
• Deploy social media to reach different demographics. Innovative social media campaigns can help put a destination on the map. Australia launched its “Ruby the kangaroo” campaign in China to coincide with the return of postpandemic air capacity between the two places. A video adapted for Chinese context (with appropriate gestures and a hashtag in Mandarin) garnered more than 20 million views in a single day on one of China’s largest social media platforms. 24 Nicole Gong, “Can Ruby the kangaroo bring Chinese tourists hopping back to Australia?,” SBS, June 5, 2023.
• Embrace unknown status. “Off the beaten path” messaging can appeal to widely traveled tourists seeking fresh experiences. Saudi Arabia’s “#WhereInTheWorld” campaign promoted the country’s tourist spots by acknowledging that they are less familiar to travelers, using a series of images that compared these spots with better-known destinations.

As tourism stakeholders look to the future, they can take steps to ensure that they continue to delight existing travelers while also embracing new ones. Domestic and intraregional tourism remain major opportunities—catering to local tourists’ preferences while building infrastructure that makes travel more seamless within a region could help capture them. Creative collaboration among tourism stakeholders can help put lesser-known destinations on the map. Travel tides are shifting. Expertly navigating these currents could yield rich rewards.

Caroline Tufft is a senior partner in McKinsey’s London office, Margaux Constantin is a partner in the Dubai office, Matteo Pacca is a senior partner in the Paris office, Ryan Mann is a partner in the Chicago office, Ivan Gladstone is an associate partner in the Riyadh office, and Jasperina de Vries is an associate partner in the Amsterdam office.

The authors wish to thank Abdulhadi Alghamdi, Alessandra Powell, Alex Dichter, Cedric Tsai, Diane Vu, Elisa Wallwitz, Lily Miller, Maggie Coffey, Nadya Snezhkova, Nick Meronyk, Paulina Baum, Peimin Suo, Rebecca Stone, Sarah Fellay, Sarah Sahel, Steffen Fuchs, Steffen Köpke, Steve Saxon, Sophia Wang, and Urs Binggeli for their contributions to this article.

This article was edited by Seth Stevenson, a senior editor in the New York office.

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Why It’s So Hard for China to Fix Its Ailing Economy

A real estate collapse has made consumers cautious and businesses wary, as China confronts a crisis unlike any other since it opened its economy to the world.

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By Daisuke Wakabayashi and Claire Fu

In 2004, as China’s economy was emerging as a global force, a group of researchers started conducting nationwide surveys asking Chinese people if they were better off financially than they were five years earlier.

The percentage who felt wealthier climbed when surveyed five years later and again in 2014, when it reached a high of 77 percent.

Last year, when respondents were asked the same question, that figure dropped to 39 percent.

The results of that survey , titled “Getting Ahead in Today’s China: From Optimism to Pessimism,” speak to a new reality. China’s economy is confronting a crisis unlike any it has experienced since it opened its economy to the world more than four decades ago. The post-Covid rebound that was supposed to bring the economy roaring back to life was more like a whimper.

A few years ago, Beijing resolved to wean its economy from its dependence on an overheated real estate market, a sector that had underpinned the savings of families as well as China’s banking sector and local government finances. Now, the property sector is in crisis. Developers collapsed , leaving behind huge debts, a trail of failed investments , unsold apartments and lost jobs.

Chinese consumers, already prone to saving heavily, have become even more frugal. Businesses that endured the crippling impact of draconian Covid measures have cut salaries and scaled back hiring. Millions of college graduates joining the job market are facing long odds and poor prospects. And China’s population has shrunk two years in a row. In a country where the majority of people had only known the economy to grow rapidly and living conditions to improve, confidence is eroding .

Sherry Yang opened her business in 2006 making store signs, billboards and posters in Sichuan Province in southwestern China. Within a few years, local firms were placing so many orders that Ms. Yang had 16 employees and her printing machines were running around the clock.

But the business has never fully recovered after Covid, she said. This summer, already sluggish demand worsened; sales in July fell 70 percent from a year earlier. Ms. Yang said it felt like every industry was struggling and no one was spending.

Ms. Yang is down to six employees, many of whom spend the day scrolling their phones because there isn’t enough work.

“This has been the most difficult year since our opening,” she said.

Consumer spending, which Chinese authorities have identified as an important driver of growth, remains weak across the economy.

Alibaba, China’s biggest e-commerce firm, said sales in its domestic online shopping business fell 1 percent in the spring. China’s summer movie box office sales have dropped by almost half over last year, according to Maoyan, an entertainment data provider. The U.S. Department of Agriculture forecast in August that Chinese consumers would cut back on buying pork and shift to cheaper beef, because of economic pressures.

A number of foreign firms that once rushed into China to catch a rising tide are now retrenching. Last month, the beauty retailer Sephora, an arm of the French luxury group LVMH, announced that it was cutting jobs because of “the challenging market.” IBM is shutting its two research and development centers in China.

And policymakers trying to respond are hindered because they cannot rely on a principal fix that worked in the past. For years, local governments borrowed money for splashy development projects that kept people working and the construction sector booming — even if there wasn’t an actual need for that much infrastructure.

But the debt from that borrowing, often funneled through opaque funding channels, has ballooned to more than $7 trillion. With investors already jittery about China’s financial system, the days of lavish borrowing for vanity infrastructure are unlikely to return anytime soon.

The Chinese government has signaled its alarm by restricting access to data about the markets and economy. Last year, it suspended releasing youth unemployment figures when the number reached record highs. It started distributing the information again this year, with a new methodology that lowered the figures.

To quell discussion of a major economic crisis, officials have warned some economists not to draw public comparisons between China’s problems and the collapse of Japan’s debt-fueled property bubble in the 1980s, which weighed on its economy for decades.

China’s debt is difficult to ignore, however.

While the housing sector’s collapse has caused much collateral damage, the risk of insolvency is minimized by China’s tightly controlled financial system. The danger is that the government could have fewer fiscal resources to deploy to keep things from unraveling.

“The consequences for this fiscal crisis is less growth,” said Alicia Garcia-Herrero, chief economist for the Asia-Pacific region at the investment bank Natixis.

The economic uncertainty has left Chinese savers and foreign investors alike scrambling for safe places to park their money. Real estate prices continue to plunge , and Chinese stocks are underperforming compared with those in just about every other major country, including the United States, Japan and India.

Foreign funds have turned into net sellers of Chinese equities in 2024, which would be the first annual outflow since the data became available a decade earlier. Shares of around 180 Chinese companies have been removed from a critical stock market index since the start of the year, reducing the presence of Chinese firms in global benchmarks.

Investors have retreated to the safety of China’s bond market, driving up prices and pushing down yields. But even that comes with a potential risk. Yields collapsed so drastically that the country’s central bank is now concerned that it might leave banks vulnerable if interest rates rise in the future.

Chinese investors have also piled into gold , helping drive prices to record highs.

China has forecast that its economy will grow about 5 percent this year, a faster rate than most major economies, although that may now be in doubt. A record-setting surge in exports , flooding the world with electric vehicles, batteries and household appliances, is fueling China’s economic growth. But the resulting glut of supply is also undermining the profitability of the high-tech manufacturing industries that China had hoped would soften the blow of its painful shift from real-estate-led growth, while drawing a backlash from a growing number of major trading partners.

For its part, China has downplayed economic concerns. In an April opinion article in state media, Jin Ruiting, director of the Institute of International Economics at the Chinese Academy of Macroeconomic Research, said Western media and politicians continued to “make a fuss about China’s short-term economic fluctuations,” while “unilaterally exaggerating the problems and challenges of the Chinese economy.”

But fundamental problems remain.

For a vast number of young people, there are not enough jobs. In July, China’s unemployment rate among 16- to 24-year-olds jumped above 17 percent, from 13 percent in June.

Winnie Chen graduated this summer with an auditing degree in Nanchang, a southeastern Chinese city. She took the civil service exam in March but didn’t land a job, competing against hundreds of applicants for every available position.

She started looking for private-sector jobs. Ms. Chen messaged 1,229 companies on a job-seeking app and applied for 119 jobs in accounting, e-commerce, social media and other industries. After dozens of interviews, she said, she scored a few job offers — but all came with “absurd” conditions.

One job had a starting salary of $380 a month, which she considered too low to live on. Another company offered her a position, but said she would have to work on public holidays and not get any days off in return. She was offered a position she was told was for a makeup artist, but declined after learning she would actually have to work in a nightclub.

“It feels like there are too many college graduates now, too many people but too few jobs,” Ms. Chen said, noting that many of her classmates were jobless. “The economy is in a bad state.”

Daisuke Wakabayashi is an Asia business correspondent for The Times based in Seoul, covering economic, corporate and geopolitical stories from the region. More about Daisuke Wakabayashi

Claire Fu covers China with a focus on business and social issues in the country. She is based in Seoul. More about Claire Fu

China leads in chipmaking equipment spending

China is topping the charts

According to new Nikkei reporting, China has become the leading spender on chipmaking equipment, amassing $25 billion in investments during the first six months of 2024.

Moreover, the spend is expected to continue at the same rate, with the country likely to hit $50 billion on semiconductor equipment by the end of this year.

So far this year, China has spent more than South Korea, Taiwan and the US combined, highlighting the country’s major buying power and its commitment to bolstering the sector amid US and EU-imposed export tariffs.

China is spending big on chipmaking equipment

Clark Tseng, SEMI's senior director of market intelligence, summarized: "Concerns over potential further [export control] restrictions also pushed them to pull in and secure more equipment they could buy in advance.”

Beyond the four walls of China, global chip industry association SEMI (cited in Nikkei ’s article) noted that the likes of Japan along with countries in Southeast Asia, America and Europe are all likely to increase spending in the sector by 2027, fuelled by the trend of localizing production in order to circumvent restrictions and tariffs as well as reduce reliance on other nations, which could pose a security issue.

In comparison, South Korea, Taiwan and the US have all decreased spending in the sector year-over-year thanks to tough economic conditions.

Looking ahead, this year’s 20% market growth is expected to continue, with a further 20% growth predicted by 2025. While artificial intelligence has undoubtedly fuelled chip sales, future developments around software-defined vehicles and other smart technologies will continue to push the market in an upward trajectory.

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With several years’ experience freelancing in tech and automotive circles, Craig’s specific interests lie in technology that is designed to better our lives, including AI and ML, productivity aids, and smart fitness. He is also passionate about cars and the decarbonisation of personal transportation. As an avid bargain-hunter, you can be sure that any deal Craig finds is top value!

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• International tourism spending of Chinese tourists 2008-2021

Chinese millionaires and tourism

Chinese medical tourists, international tourism expenditure of chinese tourists from 2008 to 2021 (in billion u.s. dollars).

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Statistics on " Travel and tourism industry in China "

• Contribution of China's travel and tourism industry to GDP 2014-2023
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• Expenses of domestic tourists in China 2013-2023
• Total number of local tourists during Chinese New Year in China 2017-2024
• Most popular domestic travel destinations of Chinese millionaires 2024
• China's revenue from international tourism 2000-2021
• Most popular international travel destinations among Chinese millionaires 2024
• Share of annual disposable income planned to be spent on travelling China 2024
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• Favorite vacation travel activities among youth in China 2024
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Other statistics that may interest you Travel and tourism industry in China

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Domestic tourism

• Premium Statistic Number of domestic tourist arrivals in China 2013-2023
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International tourism

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Tiffany is shrinking its China flagship store by half as luxury spending collapses

Tiffany & Co., LVMH’s leading jewelry maker, is planning to downsize a flagship store of more than 12,000 square feet in Shanghai, people familiar with the matter said, as sales of luxury brands plunge in the world’s second-largest economy.

Tiffany, which opened the two-floor store in Shanghai’s Hong Kong Plaza in a high-profile ceremony in late 2019, has decided to give up about half of the space, said the people, asking not to be identified because the deal is private. The brand will vacate the space later this month, the people said, and the landlord is already in talks with potential new tenants.

Both Tiffany and Lai Sun Group, which controls the high-end mall’s landlord, Lai Fung Holdings Ltd., didn’t immediately respond to requests for comment.

Tiffany’s pullback from China’s finance hub highlights the increasingly challenging business environment that global luxury giants have to navigate during an economic slowdown and a property market slump. Shoppers in the country are turning more price-sensitive, looking for bargains either in the  gray market  or overseas, such as Japan where the currency is weak. That’s triggered significant sales dips for high-end labels, curbing growth and adding pressure to profit margins.

LVMH’s watches and jewelry segment saw its revenue fall 3% in the first half of this year from the year before, making it one of the worst-performing sectors. Profit from recurring operations for this segment fell 19%. 

Tiffany also asked Lai Fung to lower rent for its Shanghai flagship, one of the people familiar said. 

The store, located in Shanghai’s core business and shopping district, features Tiffany’s first Blue Box Cafe in China which is also its third in the world. The store is currently among the brand’s largest in Asia. The cafe will remain after the downsizing, the people said.

The 187-year-old brand has been missing LVMH’s ambitious sales targets after the luxury empire of billionaire Bernard Arnault acquired the jewelry seller in 2021. Tiffany has also seen employee departures recently due to lower commissions than before, with some defecting to competitors and taking some of their loyal clients with them, Bloomberg News reported earlier this year. 

The brand is further squeezed by rivals, losing market share to companies including Cie Financiere Richemont SA’s Cartier.

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