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PETALING JAYA: The return of Chinese tourists is expected to be gradual and may take as long as a year to reach pre-pandemic levels.
CGS-CIMB Research said the return of Chinese tourists has been a major upside for Asean.
“Total tourist arrivals have yet to reach the pre-pandemic level for any of the Asean-4 countries (Malaysia, Indonesia, Thailand and Singapore).
“Thus far, the number of Chinese travellers is only 20% of the arrivals seen before the pandemic was declared. Despite this, we expect the return of Chinese tourists to be gradual, potentially taking up to a year to surpass the previous peak in 2019,” it said in a report yesterday.
CGS-CIMB Research noted that the Asean-4’s economic growth has soared as pent-up demand led to consumption’s unbridled recovery.
“Tourism-related sectors, such as transport, retail and accommodation as well as food and beverages, gained the most, albeit still being dampened by the relatively slower recovery in foreign tourist arrivals.”
Despite China’s reopening, the research house is nevertheless cautious about the outlook, going forward.
“In our view, the biggest question is whether China’s consumption-driven recovery will be substantial enough to drive growth for itself and the rest of the world.
“China’s economic growth has always been investment and exports-driven, relying on the property sector’s expansion and the consumption of other nations to drive its own economic engines.”
CGS-CIMB Research believes that the reopening jumpstart may provide the necessary impetus to drive economic growth in the short term.
“But whether the recovery is long-lasting remains to be seen. It is also unclear whether consumption will be sufficient to compensate for the slack in the investment and export sectors.
“Granted, savings are higher on a historical basis, based on data by the central bank, amid years of social containment. But whether consumers will spend depends on their confidence in the future.”
Despite the strong economic rebound, CGS-CIMB Research said China’s recovery has been primarily concentrated in non-manufacturing-related sectors.
“This may not come as a surprise as the manufacturing sector experienced extended growth over the pandemic years. It remained largely resilient amid efforts by the authorities to ensure minimal disruption to the supply chain.
“Meanwhile, concerns over frequent physical interactions closed vast swathes of the services industry.”
The research house said the robust manufacturing sector also served the global economy well throughout 2020 to 2022 and aided the growth in global trade.
“This can be seen in Chinese imports from Asean-4, which showed exceptionally high periods of growth in 2021 and 2022.
“Interestingly, the situation has now reversed.
“Global demand faltered in late-2022 and is likely to remain subdued following a slowdown in key consumer markets, such as the United States and Europe, keeping growth in manufacturing modest.”
Services, however, given its suppression throughout the pandemic, may see a steeper recovery, said the research house.
“The crux of the matter is that services are largely non-tradable. There is limited demand for imported goods if the sources of the rebound are locally rendered services such as restaurants, hospitality, healthcare or construction.
“In short, China’s domestic performance is likely to be stronger than the export market and the performance of the services sector is likely to surpass manufacturing. That could leave little spillover benefits for Asean.”
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