Impact of slowdown of outbound tourism from the People's Republic of China on Asia and the Pacific

Narayanan, Badri; Domingo, Ma. Veronica; Basu Das, Sanchita Working Paper Impact of slowdown of outbound tourism from the People's Republic of China on Asia and the Pacific ADB Economics Working Paper Series, No. 782 Provided in Cooperation with: Asian Development Bank (ADB), Manila Suggested Citation: Narayanan, Badri; Domingo, Ma. Veronica; Basu Das, Sanchita (2025) : Impact of slowdown of outbound tourism from the People's Republic of China on Asia and the Pacific, ADB Economics Working Paper Series, No. 782, Asian Development Bank (ADB), Manila, https://doi.org/10.22617/WPS250187-2 This Version is available at: https://hdl.handle.net/10419/322374 Standard-Nutzungsbedingungen: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen. 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If the documents have been made available under an Open Content Licence (especially Creative Commons Licences), you may exercise further usage rights as specified in the indicated licence. https://creativecommons.org/licenses/by/3.0/igo/ ASIAN DEVELOPMENT BANK ASIAN DEVELOPMENT BANK 6 ADB Avenue, Mandaluyong City 1550 Metro Manila, Philippines www.adb.org IMPACT OF SLOWDOWN OF OUTBOUND TOURISM FROM THE PEOPLE’S REPUBLIC OF CHINA ON ASIA AND THE PACIFIC Badri Narayanan Gopalakrishnan, Ma. Veronica Domingo, and Sanchita Basu Das ADB ECONOMICS WORKING PAPER SERIES NO. 782 May 2025 Impact of Slowdown of Outbound Tourism from the People’s Republic of China on Asia and the Pacific This paper aims to analyze the impact of outbound tourism from the People’s Republic of China on Asia and the Pacific. Three simulations have been conducted to examine different situations: 1) business-as-usual from 2017 to 2018; 2) slowdown prior to and at the start of COVID-19 pandemic, from 2019 to 2020; and 3) cautious tourism recovery from 2021 to 2022. The findings show that gross domestic product and export losses are notable when outbound travel declined. The study suggests that the economies in the region consider diversifying their markets through travel facilitation and better connectivity. About the Asian Development Bank ADB is a leading multilateral development bank supporting inclusive, resilient, and sustainable growth across Asia and the Pacific. Working with its members and partners to solve complex challenges together, ADB harnesses innovative financial tools and strategic partnerships to transform lives, build quality infrastructure, and safeguard our planet. Founded in 1966, ADB is owned by 69 members—50 from the region. ASIAN DEVELOPMENT BANK The ADB Economics Working Paper Series presents research in progress to elicit comments and encourage debate on development issues in Asia and the Pacific. The views expressed are those of the authors and do not necessarily reflect the views and policies of ADB or its Board of Governors or the governments they represent. ADB Economics Working Paper Series Impact of Slowdown of Outbound Tourism from the People’s Republic of China on Asia and the Pacific Badri Narayanan Gopalakrishnan, Ma. Veronica Domingo, and Sanchita Basu Das No. 782 | May 2025 Badri Narayanan Gopalakrishnan ([email protected]) is the founder of Infinite Sum Modelling LLC. Ma. Veronica Domingo ([email protected]) is a consultant at the Asian Development Bank (ADB). Sanchita Basu Das ([email protected]) is an economist at the Economic Research and Development Impact Department, ADB. Creative Commons Attribution 3.0 IGO license (CC BY 3.0 IGO) © 2025 Asian Development Bank 6 ADB Avenue, Mandaluyong City, 1550 Metro Manila, Philippines Tel +63 2 8632 4444; Fax +63 2 8636 2444 www.adb.org Some rights reserved. Published in 2025. ISSN 2313-6537 (print), 2313-6545 (PDF) Publication Stock No. WPS250187-2 DOI: http://dx.doi.org/10.22617/WPS250187-2 The views expressed in this publication are those of the authors and do not necessarily reflect the views and policies ofthe Asian Development Bank (ADB) or its Board of Governors or the governments they represent. ADB does not guarantee the accuracy of the data included in this publication and accepts no responsibility for any consequence of their use. The mention of specific companies or products of manufacturers does not imply that they are endorsed or recommended by ADB in preference to others of a similar nature that are not mentioned. 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Please contact [email protected] if you have questions or comments with respect to content, or if you wish toobtain copyright permission for your intended use that does not fall within these terms, or for permission to use theADB logo. Corrigenda to ADB publications may be found at http://www.adb.org/publications/corrigenda. Notes: In this publication, “$” refers to United States dollars. ADB recognizes “China” as the People’s Republic of China. ABSTRACT The study analyzes the impact of changes in outbound tourism from the People’s Republic of China (PRC) on the subregions of Asia and the Pacific—Southeast Asia, East Asia, South Asia, Central and West Asia, and the Pacific. It conducts three simulations to understand the broader economic and sectoral impacts of: 1) the expansion of outbound tourism from the PRC from 2017 to 2018; 2) its slump in 2020 due to the COVID-19 pandemic; and 3) its cautious recovery from 2021 to 2022. The study broadly finds that gross domestic product (GDP) and export gains for Asia and the Pacific subregions are notable when the number of outbound tourists is high, i.e., prior to the pandemic and later in 2021–2022, and again when the PRC slowly opened its borders. Conversely, GDP and export losses are notable when outbound tourism fell in 2020 due to pandemic. Sectoral impacts are heterogenous, and the impact on exports is not necessarily aligned with that on GDP, because there are trade diversions and sectoral resource diversions that mute the impact going from exports to GDP. Given these dependencies on the PRC’s outbound tourism, the study suggests that economies in Asia and the Pacific consider diversifying their source markets through travel facilitation and better connectivity. Keywords: outbound tourism, exports, GDP, sectors, GTAP, Asia and the Pacific, People’s Republic of China JEL codes: C68, F14, Z3 _______________________ We thank Karthikeyan Chandramohan a researcher in Infinite sum Modelling for his inputs during the preparation of the paper. We thank Jong Woo Kang, Director ERCI, for his feedback on an earlier version of the paper, and Aleli Rosario, senior economics officer in ERDI, for editorial help and inputs. An earlier draft of the paper was presented in ERDI webinar, and we thank all who attended and shared their thoughts to help us improve the paper. 1.0 Introduction The coronavirus disease (COVID-19) pandemic left an indelible mark on global tourism, causing a dramatic decline in the number of international arrivals and tourism receipts. This downturn reverberated across sectors linked to tourism, such as hospitality and transportation services, textile and handicraft businesses, and employment generated by these industries. As the world navigates the post-pandemic recovery phase, the tourism visitor numbers are gradually ticking up. However, the cautious approach adopted by the People’s Republic of China (PRC) towards international travel pushes other economies to consider alternative approaches to tourism resilience. The flow of tourists from the PRC, a major source market for many destinations in Asia and the Pacific, came to a sudden halt as the COVID-19 pandemic closed international borders and discouraged travel in the region. Economic repercussions globally were pronounced, and Asia and the Pacific bore the brunt.1 Arrivals from the PRC to Asia rose from 54.5 million to 70 million during 2015–2019, then dropped 89.6% in 2020. Among the subregions, the deepest decline in arrivals from the PRC was in East Asia, with 92% drop in arrivals in that year. And because of tourism’s interlinkages with other sectors the slowdown triggered rippled into overall economic development and growth. This study empirically examines the impact of the slowdown on outbound tourists from the PRC on the subregions of Asia and the Pacific. By delving into the historical context and recent trends of the PRC’s outbound tourism, this research seeks understanding of the economic implications and to identify potential strategies for mitigation in the future. Section 2 discusses trends in the PRC’s outbound tourism globally and within Asia and the Pacific. Section 3 reviews existing literature, focusing on the opportunities and challenges associated with outbound tourism. Section 4 elaborates on the conceptual framework of the gravity model and outlines the methodology used for empirical exercise. Section 5 discusses results and section 6 concludes with policy recommendations. 2.0 Trends of the PRC’s Outbound Tourism: Global and Asia and the Pacific This section discusses outbound travel from the PRC and its significance in tourism sectors in Asia and the Pacific. In 2015, 91.1 million tourist arrivals from the PRC were reported at destinations outside of the economy, more than double the volume of 2010.2 From 2015 to 2019, arrivals from the PRC increased 8.4% annually, faster than the global average growth of 4.9%. By 2019, arrivals from the PRC peaked at 120 million, equivalent to 8.2% of the total 1.46 billion global arrivals. But the COVID-19 pandemic led to an 87.7% drop in arrivals from the PRC worldwide, with Asia most heavily affected, after hosting 58.5% overseas tourists from the PRC in 2019 (Figure 1). 1 Asia and the Pacific consists of the 50 regional member economies of the Asian Development Bank (ADB). 2 The aggregate of international arrivals from the PRC reported by destinations is not equal to total departures from the PRC. 2 Figure 1: International Arrivals from the People’s Republic of China to the World by Region Source: ADB calculations using data from UN Tourism. China: Country-Specific: Outbound Tourism 1995–2022 (12.2023): Tourism Statistics Volume 1 (accessed 12 December 2024). Most of the tourists from the PRC were concentrated in East Asia and Southeast Asia. Among the destinations, Hong Kong, China welcomed the largest volume in 2019, accounting for 13.5% of total arrivals from the PRC. Japan, the Republic of Korea, Thailand, and Viet Nam also received a high influx of tourists from the PRC. In 2020, arrivals from the PRC to these destinations plunged 80% (Figure 2). Figure 2: International Arrivals from the People’s Republic of China by Top Destination PRC = People’s Republic of China. Source: ADB calculations using data from UN Tourism. China: Country-Specific: Outbound Tourism 1995–2022 (12.2023): Tourism Statistics: Volume 1 (accessed 12 December 2024). 0 10 20 30 40 50 60 70 80 0 20 40 60 80 100 120 140 Share of Asia (%) Million tourists Africa Asia and the Pacific Europe Latin America and the Caribbean Middle East North America Other regions Asia's share (right) 0 10 20 30 40 50 60 70 Million tourists Hong Kong, China Thailand Japan Korea, Republic of Viet Nam Singapore Taipei,China Cambodia Indonesia Philippines 3 The importance of outbound travel from the PRC varies across destinations. Tourist inflows from the PRC were most vital for Hong Kong, China, as they accounted for 66.7% of its total inbound arrivals. The tourists from the PRC contributed to over 30% of the total international arrivals in Palau (45.6%), the Republic of Korea (38.5%), Myanmar (32.7%), Mongolia (31.7%), and Viet Nam (31.2%) (Figure 3). Figure 3: Average Share of the People’s Republic of China Arrivals in Destinations in Asia, 2015–2019 Lao PDR = Lao People’s Democratic Republic. Source: ADB calculations using data from United Nations World Tourism Organization. Tourism Satellite Accounts. http://statistics.unwto.org (accessed 12 December 2024) in ADB. 2024. Asian Economic Integration Report. https://aric.adb.org/aeir2024. Looking from the expenditure perspective, since 2012, the PRC is the world’s highest tourism spender. In 2019, with $254.6 billion in spending, 17% of global tourism expenditure was from the PRC. The PRC continued to lead in outbound tourism expenditure at the peak of the pandemic. However, the recovery of the PRC has been slow compared to other markets. By 2023, the United States and Germany already surpassed their pre-pandemic spending by at least 20%. Meanwhile, although the PRC remains the top tourism spender, its expenditure in 2023 is 22.8% below its 2019 spending (Figure 4). 0% 10% 20% 30% 40% 50% 60% 70% 80% 4 Figure 4: International Tourism Expenditure PRC = People’s Republic of China. Source: UN Tourism. Compendium of Tourism Statistics data set. https://www.unwto.org/tourism-statistics/tourismstatistics-database (accessed 12 September 2024), and UN Tourism. UN Tourism Dashboard https://www.unwto.org/tourism-data/global-and-regional-tourism-performance (accessed 21 January 2025). Commercial services imports refer to the purchase of services from foreign providers by an economy. Commercial services include travel, which covers “goods and services acquired from an economy by non-residents during visits to that economy” (United Nations 2011). The PRC is a significant contributor to global services imports. In 2019, 13.8% of global travel imports and 3.2% of total global services imports were attributed to the PRC (Figure 5). Figure 5: Share of the People’s Republic of China to Global Services Imports PRC = People’s Republic of China, OECD = Organisation for Economic Co-operation and Development, WTO = World Trade Organization. Source: Authors’ calculations using data from OECD-WTO Balanced Trade in Services dataset, OECD Data Explorer (accessed 21 January 2025). Consistent with the top destinations of the PRC’s outbound tourists, the bulk of the PRC’s travel imports were from Asia and the Pacific. Their value also shows a strong preference for destinations in East Asia compared to other destinations in the region. East Asia consistently 0 50 100 150 200 250 300 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 $ billion PRC United States Germany United Kingdom France Australia 0 2 4 6 8 10 12 14 16 18 2015 2016 2017 2018 2019 2020 2021 % Global Services Imports Global Travel Imports 11 Simulation 3 estimates the impact of the limited outbound travel from the PRC to the economies in Asia and the Pacific. Since the 2022 data on travel imports, which are expressed in monetary values, are not yet available in the OECD-Balanced Trade in Services database, this study uses the change in tourism flows from the PRC to destinations in Asia as a proxy. The model used in the study, based on a CGE framework, contains all variables in real terms. Even though the shocks used in simulations 1 and 2 are changes in monetary values, since these are in real terms, the changes in tourism flows show the same trend in percentage terms. The implicit assumption is that we capture just the volume effects in terms of shocks and of results, with changes in price separately captured in the model based on supply and demand interactions and movement towards equilibrium. The model separately captures price changes and volume changes, which are the same as value changes in real terms (constant prices). The percent change in value (in current prices) is the sum of percent change in volumes (or values in constant prices) and percent change in prices. When we shock the volume changes (simulation 3), it is similar to the shock in value changes in real terms (simulations 1 and 2). Essentially, the results are expressed in changes in constant prices. This entails that the model equations decompose all the values into prices and quantities. 5.0 Results and Discussion A correlation analysis between outbound tourism expenditure and different macroeconomic variables is undertaken for 2019. The correlations are more than 0.7, which indicates that outbound tourism expenditure has a high correlation with other macroeconomic variables (Table 1). The results indicate that outbound tourism expenditure has a stronger correlation with trade and domestic credit than with GDP or trade in services. Table 1: Correlation between Outbound Tourism Expenditure and Other Variables Outbound Tourism Expenditure GDP in constant 2015 dollars 0.85 Trade 0.92 Trade in services 0.77 Domestic credit by the financial sector 0.92 GDP = gross domestic product. Source: Authors’ calculations. The results for each of the simulations are discussed in the following sections. 5.1 Simulation 1: Business as Usual (2017–2018) In simulation 1, the results (Table 2) show that while most subregions have miniscule change in GDP, the Pacific benefited from a 0.02% increase in GDP due to tourists from the PRC. This entails that international arrivals from the PRC are significant not just to the tourism sector of the destinations in the Pacific but also to their greater economy. The finding is consistent with previous literature that shows that tourism exports as a share of GDP are vital for the economies in the Pacific (Gupta et al. 2024). Moreover, the PRC is a key source market for the Pacific, particularly Palau, with 45.6% of its international arrivals from the PRC (ADB 2024). 12 Simulation 1 also reveals that East Asia, which welcomed the highest volume of tourist arrivals from the PRC and is the largest source of the PRC’s travel imports, enjoyed the highest absolute change in GDP ($125.04 million). Meanwhile, the GDPs of South Asia and Central and West Asia show the lowest absolute change. This reflects the relatively low tourism flows from the PRC to these two subregions. Table 2: Changes in GDP due to the PRC’s Outbound Tourism by Subregion (Business as Usual) Subregion % Change Absolute Change ($ million) Central and West Asia ≈0 1.12 East Asia ≈0 125.04 Southeast Asia ≈0 21.56 South Asia ≈0 2.52 Pacific 0.02 9.65 Oceania ≈0 11.41 PRC = People’s Republic of China, GDP = gross domestic product. Source: Authors’ calculations. Among subsectors, change in exports is highest for recreational services in East Asia, Central and West Asia, South Asia, and Southeast Asia. In East Asia, increasing tourism flows from the PRC raises exports of recreational services by 24.83% and accommodation, goods and services by 5.91%. Meanwhile, while Central and West Asia attracts a relatively small volume of visitors from the PRC, the rise in international arrivals from the PRC has strong influence in the exports of tourism industries such as recreational services, and accommodation, food and beverage services. In the Pacific, tourism flows from the PRC helps air transport through exports of air transport by 2.09% (Table 3). 13 Table 3: Changes in Exports of Tourism Industries due to the PRC’s Outbound Tourism by Subregion (Business as Usual) Subregion/Sector % Change Subregion/Sector % Change East Asia Southeast Asia Accommodation, food and beverage services 5.91 Accommodation, food and beverage services 2.08 Air transport -0.30 Air transport 0.18 Water transport -0.24 Water transport -0.08 Recreational services 24.83 Recreational services 8.59 Retail trade -2.00 Retail trade 0.22 Central and West Asia South Asia Accommodation, food and beverage services 6.53 Accommodation, food and beverage services 0.16 Air transport 1.73 Air transport 0.06 Water transport -0.08 Water transport 0.83 Recreational services 20.81 Recreational services 10.46 Retail trade 0.06 Retail trade 1.25 The Pacific Oceania Accommodation, food and beverage services 0.99 Accommodation, food and beverage services 1.08 Air transport 2.09 Air transport 0.81 Water transport -0.31 Water transport -0.10 Recreational services 1.90 Recreational services 3.79 Retail trade -0.40 Retail trade 0.39 Source: Authors’ calculations. 5.2 Simulation 2: Slowdown in the PRC’s Outbound Tourism as a Result of COVID-19 in 2020 Simulation 2 estimates the impact of the pandemic-induced slowdown of the PRC’s outbound tourism to Asia and the Pacific. The results demonstrate that the decline in tourism flows from the PRC has hurt all subregions. The findings on changes in GDP show that the worst hit subregions are the Pacific (-0.05%) and East Asia (-0.01%). In absolute change, East Asia suffered a massive loss in GDP ($526.57 million) (Table 4). Table 4: Changes in GDP Due to Slowdown in the PRC’s outbound Tourism by Subregion Subregion/Economy % Change Absolute Change ($ million) Central and West Asia ≈0 -2.00 East Asia -0.01 -526.57 Southeast Asia ≈0 -76.00 South Asia ≈0 -6.10 The Pacific -0.05 -19.47 Oceania ≈0 -59.47 GDP = gross domestic product. Source: Authors’ calculations. 14 The drop in tourist arrivals from the PRC has severely reduced the exports of accommodation, food and beverage services, and recreational services. The negative impact can be clearly seen in East Asia, where the estimated change in exports of recreational services (-33.16%) and accommodation, food and beverage services are highest (-24.47%) (Table 5). Notably, in all subregions, the change in exports of air transport is hurt by the slowdown in the PRC’s outbound tourism. On the other hand, in East Asia, the exports of air transport are helped. Table 5: Change in Exports of Tourism Industries due to Slowdown in the PRC’s Outbound Tourism by Subregion Subregion/Sector % Change Subregion/Sector % Change East Asia Southeast Asia Accommodation, food and beverage services -27.47 Accommodation, food and beverage services -6.78 Air transport 2.05 Air transport -1.45 Water transport 0.99 Water transport 0.23 Recreational services -33.16 Recreational services -12.06 Retail trade 10.79 Retail trade -1.33 Central and West Asia South Asia Accommodation, food and beverage services -7.93 Accommodation, food and beverage services -3.21 Air transport -1.52 Air transport -0.23 Water transport 0.05 Water transport -0.76 Recreational services -11.88 Recreational services -6.43 Retail trade -1.37 Retail trade -2.25 The Pacific Oceania Accommodation, food and beverage services -2.53 Accommodation, food and beverage services -4.03 Air transport -1.67 Air transport -1.53 Water transport 0.52 Water transport 0.09 Recreational services -7.94 Recreational services -6.52 Retail trade -0.66 Retail trade -2.07 Source: Authors’ calculations. 5.3 Simulation 3: Gradual Easing of Outbound Travel from the PRC (2021–2022) The slight uptick in tourist arrivals from the PRC to destinations in Asia is due to the easing of travel protocols for essential travel between the PRC and select economies (Huld 2022). Simulation 3 estimates the impact of the limited travel from the PRC during the period of 2021 to 2022. Simulation 3 reveals that the slight growth of the PRC’s tourism flows has the most impact on GDP in the Pacific (0.02%). In absolute change, all subregions show growth, with Southeast Asia showing the biggest absolute change in GDP ($81.7 million) followed by East Asia ($74.05) (Table 7). 15 Table 6: Change in GDP Due to Gradual Easing of Outbound Travel from the PRC by Subregion Subregion % Change Absolute Change ($ million) Central and West Asia ≈0 0.28 East Asia ≈0 74.05 Southeast Asia ≈0 81.70 South Asia ≈0 0.31 The Pacific 0.02 1.99 Oceania ≈0 4.84 GDP = gross domestic product. Source: Authors’ calculations. The slow reopening of the PRC’s borders also meant the sluggish recovery of exports of tourism industries to the PRC. This is reflected in the findings, which show minimal change in exports of travel industries from Asia to the PRC. Based on the results, the change in exports is most evident in Southeast Asia among the subregions, where exports of recreational services (6.79%), and accommodation, food and beverage services (3.98%) benefited from the resumption of outbound travel from the PRC, although it was limited. Change in exports of accommodation, food and beverage services, and recreational services in East Asia also show a slight increase in exports (Table 8). Table 7: Percent Change in Exports of Tourism Industries by Subregion due to Gradual Easing of Outbound Travel from the PRC (2021–2022) Subregion/Sector % Change Subregion/Sector % Change East Asia Southeast Asia Accommodation, food and beverage services 1.68 Accommodation, food and beverage services 3.98 Air transport -0.05 Air transport 0.64 Water transport -0.04 Water transport -0.14 Recreational services 2.06 Recreational services 6.79 Retail trade -0.32 Retail trade -0.39 Central and West Asia South Asia Accommodation, food and beverage services 0.56 Accommodation, food and beverage services 0.23 Air transport 0.05 Air transport 0 Water transport 0 Water transport 0.06 Recreational services 0.86 Recreational services 0.49 Retail trade 0.04 Retail trade 0.11 The Pacific Oceania Accommodation, food and beverage services 0.79 Accommodation, food and beverage services 1.05 Air transport 0.48 Air transport 0.37 Water transport -0.17 Water transport -0.03 Recreational services 2.52 Recreational services 1.8 Retail trade -0.42 Retail trade 0.05 PRC = People’s Republic of China. Source: Authors’ calculations. 16 5.4 Summary of Results The simulations show that the percent change in GDP is small across subregions. In absolute change, in all simulations, the PRC’s outbound tourism has the most substantial effect on East Asia’s GDP, attributed to the high concentration of tourists from the PRC in the subregion compared to other destinations in Asia. The Pacific subregion shows the most apparent percent change in GDP, given the subregion’s high dependence on tourism, with visitors from the PRC a vital market in fueling the subregion’s tourism development (Table 9). Simulation 3 clearly demonstrates the change in total exports in East Asia and Southeast Asia during 2021–2022 (Table 10). The finding reflects the effect of the interventions implemented during the pandemic. Quarantine-on-arrival policy was highlighted as a key factor deterring travelers from the PRC for outbound travel (Parulis-Cook and Wang 2022). To stimulate business travel while minimizing the risk of COVID-19 transmissions, the PRC signed reciprocal fast track agreements with certain economies, including Japan, the Republic of Korea, and Singapore. The bilateral arrangement allowed business travelers to enter without undergoing quarantine procedures (Zhang 2021). The result is also consistent with previous literature that suggests that good international relations are crucial for maintaining bilateral tourist flows and promoting tourism development (Jin, Qu, and Bao 2019). Table 8: Change in GDP due to the PRC’s Outbound Tourism by Subregion Simulation 1 (2017–2018) (Business as usual) Simulation 2 (2019–2020) (Slowdown) Simulation 3 (2021–2022) (Gradual easing) Subregion % change Absolute change ($ million) % change Absolute change ($ million) % change Absolute change ($ million) Central and West Asia ≈0 1.12 ≈0 -2.00 ≈0 0.28 East Asia ≈0 125.04 -0.01 -526.57 ≈0 74.05 Southeast Asia ≈0 21.56 ≈0 -76.00 ≈0 81.70 South Asia ≈0 2.52 ≈0 -6.10 ≈0 0.31 The Pacific 0.02 9.65 -0.05 -19.47 0.02 1.99 Oceania ≈0 11.41 ≈0 -59.47 ≈0 4.84 GDP = gross domestic product. Source: Authors’ calculations. 17 Table 9: Change in Total Exports due to the PRC’s Outbound Tourism by Subregion Simulation 1 (2017–2018) (Business as usual) Simulation 2 (2019–2020) (Slowdown) Simulation 3 (2021–2022) (Gradual easing) Subregion % Change Absolute change ($ million) % Change Absolute change ($ million) % change Absolute change ($ million) Central and West Asia ≈0 3.05 ≈0 -4.10 ≈0 1.28 East Asia ≈0 57.40 -0.04 -521.95 0.01 167.21 Southeast Asia 0.02 9.20 -0.01 -88.13 0.09 214.30 South Asia ≈0 4.40 ≈0 -6.60 ≈0 2.41 The Pacific 0.01 11.20 ≈0 -14.17 ≈0 9.39 Oceania ≈0 30.13 ≈0 -79.98 ≈0 69.91 Source: Authors’ calculations. 6.0 Conclusion and Policy Recommendations The study analyzes the impact of the changes in the PRC’s outbound tourism to Asia and the Pacific using a GTAP model. Three different simulations are conducted to examine the different macroeconomic situations: business-as-usual scenario (2017–2018), pandemic-induced slowdown of the PRC’s outbound tourism (2019–2020), and the gradual easing of outbound travel from the PRC (2021–2022). The simulations indicate that the changes in the outbound travel from the PRC have the greatest impact on the Pacific subregion, implying its strong reliance on the tourism sector and the PRC as a key source market. Meanwhile, the marginal adjustments in exports as a result of the slowdown in the PRC’s outbound travel are more apparent in East Asia and Southeast Asia. Moreover, with the introduction of fast-track arrangements with select economies that eased cross-border travel during 2021 to 2022, the simulation suggests improvement in the GDP and total exports of East Asia and Southeast Asia. The results of the study underscore the importance of diversifying source markets to build resilience in the tourism sector. Strong reliance on a limited set of markets would make economies in Asia and the Pacific vulnerable to external shocks, as observed during the COVID-19 pandemic. Thus, economies should identify new markets and strengthen their linkages by building transport connectivity and enhancing travel facilitation through liberal air services agreements and visa policy. In addition, destinations need to develop new product offerings that would attract their target markets. These would enhance their attractiveness and help expand the destinations’ market base. Aside from diversifying source markets, strengthening domestic and regional tourism (such as the Association of Southeast Asian Nations, Central Asia Regional Economic Cooperation, or South Asia Subregional Economic Cooperation) can also help economies become more resilient to external shocks such as financial crises, or pandemics. 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