Investment in China's tourism industry: Its scale, nature, and policy issues

Abstract

This article provides an overview of tourism investment in China in the period 1979–1988. The tourism industry has been a leading industry in China in its expansion. Foreign investment has played a large role in the expansion of the tourism sector in China and the nature of this investment and its impact are discussed. Very often the economic interdependence of tourism with other sectors of the economy are ignored by policy-makers and in discussion of the tourism industry. In China, lack of attention to these intersectoral interdependencies has resulted in unbalanced investment and economic growth. Investment in the tourism industry in China has tended to be concentrated in the building of hotels for a number of reasons mentioned in the paper. Furthermore, this investment has been dominated by foreign capital and there appears to have been overconcentration on the building of high-class hotels. A top-heavy structure has emerged which is not well-suited to customer demands. In general, the building of hotels appears to have proceeded more on the basis of preconceptions by officials and suppliers than on the basis of market or economic analysis. Thus, the current location and pattern of supply is such as to make many hotels uneconomic. There appears to be a need to re-evaluate policies in relation to the tourism industry in China. The downturn in foreign tourism to China following the political events of June 1989 should provide a stimulus for such re-evaluation. Even before these events, it was clear that tourism growth was significantly tapering off. While this might suggest to some that China is entering a ‘mature phase’ in the product cycle as far as foreign tourism is concerned, China has many untapped or only peripherally exploited opportunities for expanding foreign tourism. So one should not be pessimistic about the prospects for a substantial increase in foreign tourism to China.