Figures released by the National Tourism Administration of China (CNTA) in July 2009 showed that China’s tourism industry is continuing to suffer. In the first six months of 2009, inbound arrivals fell by 5.0% year-on-year, to 62 million. Tourist arrivals from Russia and South Korea have dropped most sharply, falling by 53.3% and 32.8% respectively, reflecting the weakening of their currencies against the yuan. As a result, the tourism industry is now downgrading its forecasts for 2009. In total, inbound arrivals are expected to fall by 5.0% over the year as a whole, to reach 124 million. More encouragingly though, tourist revenue is forecast to rise in 2009, growing by 3% to total CNY1.2 trillion, with CNY35 billion received from foreign tourists. This apparent mismatch between declining arrivals and rising revenues reflects the strength of the yuan in 2009.

Although arrivals are falling, the strong currency means that foreign exchange revenues will continue to benefit in 2009. Hong Kong Tracks China In fitting with its growing role as the primary gateway to mainland China, Hong Kong is suffering a similar downturn in its tourist arrivals. In the first half of the year, tourist arrivals dropped by 3.4% yearon- year, to 13.7 million. Notably, the greatest decline was seen in long-haul arrivals, bearing out our view that such vistitors will be deterred by the rising airline prices, as well as global concerns regarding the spread of swine flu (H1N1). Long-haul arrivals fell by 14% year-on-year, compared to a drop of 1.4% for short-haul regional arrivals. However, arrivals from mainland China bucked the trend to grow by 4.6% annually, to total 8.26 million.

Such growth indicates that mainland Chinese are focusing on domestic tourism during the economic downturn, with locations such as Hong Kong, Macau and Tibet likely to benefit as a result. New Domestic Airline Launched In mid-June, new domestic carrier Tianjin Airlines launched its first flight. The airline is currently operating 10 routes, with destinations including Hohot, Taiyuan, Qingdao, Dalian and Xian. It also plans to launch two more routes, to Weihai and Nanchang, in the coming months. The company’s business plan calls for it to be operating 500 routes by 2012, with 100 aircraft. It also intends to launch limited international routes by this point. The new airline is backed by a joint venture comprising the Hainan Air Group, Hainan Airlines and Tianjin Port Free Trade Zone Investment Company. The launch of the new airline is a positive sign for the air industry in China, indicating that domestic demand for air travel continues to rise. This is despite the generally negative figures being reported by China’s international carriers, which are suffering heavily from the adverse external environment.