Measuring the Economic Impact of Tourism in China

Abstract

In the past two decades both inbound tourism and domestic tourism have achieved sustainable growth in China. Tourism has grown to a significant size and it contributes substantially to the Chinese economy. However the analysis of its economic impact is still a neglected issue in China(Xu: 1999) . This paper tries to measure the economic impact of tourism evaluate the contribution of tourism to the national economy and find some policy implications. The impact includes direct and indirect increase in production labor income employment imports indirect tax etc. through the injection of tourist expenditures into the economy. To catch both the direct and indirect impact of tourism the paper first constructs a 48 sector social accounting matrix(SAM)for tourism analysis. Then the SAM multipliers are calculated. The total direct and indirect impact of tourist expenditures is the product of the multipliers and the primary injection of tourist expenditures. In order to strengthen the communication between China and the rest of the world and to earn hard currencies to facilitate imports of technology and facilities after 1978 the Chinese government made inbound tourism a priority as many developing countries were doing. However the study finds that domestic tourist expenditure has a larger economic impact on Chinese economy in terms of production value added labor income indirect tax and employment. The implication is that development of domestic tourism is more desirable than that of inbound tourism. Because export ability has been improved and foreign exchange reserves are high the role of inbound tourism as a foreign exchange earner has declined. Domestic tourism development could stimulate present weak household consumption and its development would not trigger a serious problem of insufficient supply as occurred in the 1980s due to the substantial improvement of the ability to meet tourism demands. It is time to shift tourism development priority from inbound tourism to domestic tourism.