Thursday, October 4, 2018

Biggest US Export to China? Spending by Chinese Tourists

International tourism is counted in the official economic statistics as an export industry. We don't always think about it that way. But when, say, Chinese tourists in the US purchase goods and services, then Chinese consumers are buying goods and services produced in the United States--which is what "exports" means.

Thus, I found it interesting that US exports of services to Chinese tourists in the US is the US industry with the largest exports to China. Here are some facts as compiled by the US Travel Association:
  • "In 2016, 3.0 million Chinese travelers visited the U.S., an increase of 15 percent from 2015." 
  • "China was the third-largest overseas inbound travel market to the U.S. in 2016." Apparently, 12% of all overseas tourist visits to the US originate from the United Kingdom, 9% from Japan, and 8% from China. 
  • "Travel exports to China (ie: spending by Chinese visitors and students in the U.S., and on U.S. airlines) reached $33.2 billion in 2016, significantly higher than any other country. This includes $12.5 billion in education-related spending by Chinese students in the U.S."
  • "Average spending per Chinese visitor was $6,900 in 2016, the highest of all international visitors." If I'm reading the footnotes correctly, this number doesn't include spending on education." 
  • "Travel is the largest U.S. industry export to China, accounting for nearly 20 percent of all exports of U.S. goods and services to China."
As the trade conflicts between the US and China continue, what is the likelihood that China might retaliate by making it harder for Chinese tourists to reach the US? After all, China has used limitations on tourism to put pressure on South Korea, Taiwan, and others.

At least one commenter in the travel industry thinks it unlikely, for several reasons. Many Chinese firms are involved in the Chinese tourism industry, so limiting tourism would hurt them, too. China has been choosing its tariff retaliation targets with some eye to hitting states that supported the election of President Trump, but limits on Chinese tourism to the US would have the biggest effects in California, New York, Illinois, and Massachusetts--none of them Trump strongholds. Finally, cutting Chinese travel to the US would also affect a lot of Chinese firms operating in the US and world markets, as well as Chinese students at US colleges and universities, which does not appear to be a goal of China's government.

One irony here is that some of President Trump's proposals to limit immigration would have the effect of reducing foreign students studying in the US--and of the million or so foreign students in the US, about one-third are from China.  Given that these foreign students are a US export industry, consuming goods and services (especially education services) produced in the United States, such a step would have the opposite effect of the Trump administration desire for higher US exports to China and other countries.