Europe might be in for a surprisingly quiet summer
Many people in Italy or France were hoping that once China opened up, millions of Chinese tourists would flock to European touristic attractions, bringing much needed business lifeline to a struggling European economy. Yet compared to pre-covid, Chinese tourists are not rushing to Milan or Paris this summer. Contrary to popular belief, the European heat wave is not the main reason why Chinese are staying home, because China is also experiencing record high temperatures. So what’s keeping Chinese from traveling overseas?
First, long visa lines in many China-based European consulates are hindering travel planning. A friend of mine told me that she went online to register for a visa interview in April, but her paperwork and interview can only be processed in September. In other words, there is an extensive long wait of 4–5 months for Chinese to get an European tourist visa. Staffs shortage in many consulates are key reasons of such delay, since many of them left during the China lockdowns and few want to return. On the other hand, Chinese authorities are issuing passports at a relatively slower pace, adding to the longer waiting period.
Second, the slower pace of issuing passports by the Chinese authorities somehow matches with the government’s wishes for Chinese to consume and spend money at home. With China’s overall economy cooling off, direct investment and export softening, consumption is the only viable way to revive the Chinese economy, and thus the government would want consumers to spend their money at home instead of abroad. This is reflected by recent data that Chinese are buying luxury goods at home instead of at European cities.
In addition, touristic attractions within China have experienced an upgrade in the last few years, from infrastructure to service quality, making the whole experience much enjoyable. Also, the “why do I want to go overseas when I am not welcomed due to increased geo-politics hostility?” sentiment is high among ordinary Chinese, so many people opt to explore within China — thus you see photos of long-lines to get inside Beijing’s Forbidden City under the grilling sun, or long lines of camel rides in northwest China city of Dunhuang.
Third, perhaps most importantly, post-covid Chinese consumers have less money on their hands. Many of them have used up their savings during lockdowns, and most of them are worried about their future job stability, thus prefer saving their money instead of spending it. This is reflected by high savings rates and two consecutive months of decreased CPI numbers where China is experiencing a deflation. Furthermore, a weaker Chinese currency (an higher inflation in Europe) is making overseas travel more expensive. This is especially worrisome for the global markets since Chinese consumers are being seen as the leading force in global consumption that could lead to economic recovery.
After a short “revenge spending” period reflected right after the lockdown ease, Chinese consumers are returning to a harsh new reality — the softening of Chinese economy — something that almost 50% of the population never experienced before. So, despite global temperature is reaching new heights, Chinese consumers are ever watchful of their pocket books and opt to stay home to chill out — like the rabbit — ever so alerted of its surroundings and always playing safe. And that’s not good news for the global market. ## LL.