What's Happening?
Morgan Stanley analysts have identified Air China as a key beneficiary of China's emerging tourism trend, which is expected to generate industry revenue of at least $2 trillion over the next decade. Following China's full reopening from the pandemic in January 2023, inbound travel has increased significantly, with the first quarter of 2023 seeing the highest number of inbound tourists. China has eased visa restrictions, allowing travelers from over 30 European countries and parts of Asia and Latin America to visit without a visa for 30 days. U.S. citizens can transit through China for 10 days without a visa. The analysts believe that airlines, particularly Air China, will benefit from this trend, despite current softening domestic demand.
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Why It's Important?
The increase in inbound tourism to China presents significant opportunities for global business development and shopping, particularly with expanded tax refund programs amid global tariffs. Morgan Stanley's focus on Air China highlights the potential for international demand to boost profit margins for Chinese airlines. This trend could also lead to a broader economic impact, as regional conferences and events resume in China, attracting participants from across Asia. The anticipated growth in tourism could help China expand its share of the global tourism market to 6% by 2034, up from 2.4% in 2019.
What's Next?
Morgan Stanley remains optimistic about China's inbound travel growth and its impact on the airline industry. The firm is monitoring the inflection point for Chinese airlines, particularly Air China, as international demand continues to rise. The resumption of regional conferences and events in China is expected to further support this trend, with global businesses increasingly sending representatives to the country. The analysts predict that the uptick in international visitors will contribute to China's economic growth and its position in the global tourism market.
Beyond the Headlines
The easing of visa restrictions and the promotion of foreign-friendly services in China, such as international credit card transactions via mobile pay, reflect broader efforts to integrate into the global economy. These measures could lead to long-term shifts in how China engages with international visitors and businesses, potentially influencing global tourism patterns and economic relations.
