Clearly, one big change is that China has started running a trade deficit in services (an area where the US economy runs a trade surplus). The main reason seems to be a large increase in outbound Chinese tourism, because in trade statistics, international tourists are in effect “importing” goods produced in other countries. The IMF economists write: “China’s tourism balance, mostly on account of outbound tourism, has swung from a small surplus of around 5bn USD in 2008 to a deficit of nearly 250bn USD in 2018, driven by the increasing purchasing power of the middle class and an appreciating currency. … [T]he trend is undeniable. It is also borne out by an almost fourfold increase in the number of Chinese outbound visitors – from 46mn in 2008 to 162mn in 2018.”
The IMF report goes on to explain that China’s modest account surplus “is expected to turn into a small deficit in the medium term as the structural factors…continue to drive up imports and moderate exports.”
One artificial means of slowing the rise in imports, however, might also have domestic political benefits for Zhongnanhai. Xiaochen Su highlights recent travel restrictions to Taiwan imposed on the residents of 47 Chinese cities, and suggests that this may only be the start. It would be a true win-win for the CCP: reduce exposure to “Western liberal values” abroad while also denying countries the tourist income from Chinese visitors. As Su writes:
The Chinese government, to prevent Chinese citizens from learning unwanted Western liberal values abroad, could increasingly seek to limit the scope of Chinese outbound travel in the near future. On one hand, as is the case for Taiwan, independent travel, in which travelers have more opportunities to interact freely with locals, could be banned in favor of group travel that allows licensed and “politically correct” travel agencies to closely monitor travelers. On the other hand, the government could simply make the process of acquiring a passport more stringent, with ever higher education, income, and even professional requirements that make most of its citizens unqualified and ineligible for a passport. Using such methods, the government can better ensure that only those it wants to travel abroad can travel under circumstances that do not allow them to stray from the standard Chinese political discourse they hear at home.
So will the Chinese tourist export boom fade away? Su is right to argue that Western countries should avoid kowtowing to certain demands from Beijing in order to keep the tourists coming, given that their numbers may well be limited in the near future owing solely to domestic Chinese policy. But if travel is curtailed, will it be possible to divert the yuan that would otherwise have been spent abroad to domestic consumption? Otherwise, China’s “merely extraordinary” savings glut might head upwards once again, contributing to the ongoing global slowdown.