Morgan Stanley Fixed-Chinas D Journey Chinas Travel Transition-此为英文文档

Morganstanley

May8,202409:00PMGMT

RESEARCH

China's3DJourney

China'sTravelTransition

DespitestagnantrecoveryinChina'soutboundtravelandsoftdomesticconsumptions,visitorarrivalsarepickingupfollowingsupportivepoliciesfacilitatinginboundtravel.Weseea

cumulativeUS$1.7-4.5trillioninboundtourismrevenueopportunityoverthenext10years.

AnotherpotentialdriverofChina'sexportgrowth?Chinaexpandeditsshareof

globalgoodsexportsto14%in2023,fourtimesthatin2000.However,asof2022,Chinaonlyhad~6%shareofglobalserviceexports.Globally,about~40%ofserviceexportscamefromtransportandtravel,butChinaonlyhada~2.4%shareofglobalinternationaltourists,in2019.WethinkitwillberelativelyeasierforChinato

expanditsserviceexportsharebyattractingmoreinternationalvisitors,comparedwithviaotherserviceexports,suchasIT,financialservices,orIPcharges,etc.

InboundtourismisimportanttoChina'seconomicgrowth.In2019,inbound

tourismrevenuecontributed~0.9%ofChina'sGDP,butthisfellto~0.3%in2023.ExcludingtouristsfromHK/Macau,internationalvisitorsonlycontributed10%ofChina'stotaltourismrevenuein2019,muchlowerthantheglobalaverageof28%,and~20%intheUS,JapanandUK.Weseepotentialforinboundtourism's

contributiontoriseto2-4%ofChina'sGDPinthenext10years.

Inflectionpointmightbearriving.Chinahasupgradedits'hardware'duringthe

pastfouryears,includinginfrastructure,pollutioncontrols,andpublicsafety

improvements.SincereopeningafterCovidin2023,Chinahasalsofacilitatedmoreconvenientinboundtravelbyallowingvisa-freetravelfrommorecountries,makingdigitalpaymenteasierforvisitors,andupgradingrailwayticketingsystems,etc.Wethinkglobalinflation,incontrasttoChina'sdeflation,isalsolikelytoattracttouristsseekingvalue-for-moneyoptions.

Whatdoweexpectfrominboundtourism?Internationalvisitationhassurged,

+300%YoYinthepastquarter,especiallyfromcountrieswhereChinahasrecentlyallowedvisa-freeentry.WeseeroomforacumulativeUS$1.7-4.5trillionrevenue

opportunityfrominboundtourisminthenext10years,through:1)attractingmoreoverseasvisitors;and2)improvingthespendingqualityofHK/Macauvisitors.We

thinkbusinesstravelrecoverywillbefastervs.leisure,whileshort-haulAsiatouristsmayarriveearliervs.long-haulones.WealsoexpectaspendingincreasefromHK

visitorsintheneartermashigher-qualitytravellersbecomemorefrequent.

Whatsectorscouldbenefit?Transport,lodging,OTAandretailindustriesshouldbenefitmostfromsurginginboundtourismrevenuetomainlandChina,whilethe

HongKongretailandpropertysegmentscouldfindthishasanegativeimpact.Keyhurdles:Chinaneedstocontinuetoworkon'software'upgradestofacilitateforeign

travellers,inareasincludinglanguage,hotellicenses,payments,aswellasinformationaccess,etc.

AsiaPacificInsight

MorganStanleyAsiaLimited+

QianleiFan,CFA

EquityAnalyst

+8522239-1875

Qianlei.Fan@

RobinXing

ChiefChinaEconomist

+8522848-6511

Robin.Xing@

TennySong

ResearchAssociate

+8523963-1737

Tenny.Song@

AlexPoon

EquityAnalyst

+8523963-3838

Alex.Poon@

GaryYu

EquityAnalyst

+8522848-6918

Gary.Yu@

PraveenKChoudhary

EquityAnalyst

+8522848-5068

Praveen.Choudhary@

HildyLing

EquityAnalyst

+8522239-7834

Hildy.Ling@

DanChee

EquityAnalyst

+8522239-1227

Dan.Chee@

RebeccaXu

EquityAnalyst

+8522848-7359

Rebecca.Xu@

ZhipengCai

Economist

+8522239-7820

Zhipeng.Cai@

HongKong/ChinaTransportation&

Infrastructure

AsiaPacific

IndustryViewIn-Line

Relatedresearch:TGroupLtd:

EmpoweringChinaInboundTravel

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companiescoveredinMorganStanleyResearch.Asaresult,investorsshouldbeawarethatthefirmmayhaveaconflictofinterestthatcouldaffecttheobjectivityofMorganStanley

Research.InvestorsshouldconsiderMorganStanley

Researchasonlyasinglefactorinmakingtheirinvestmentdecision.

Foranalystcertificationandotherimportantdisclosures,refertotheDisclosureSection,locatedattheendofthisreport.

+=Analystsemployedbynon-U.S.affiliatesarenotregisteredwithFINRA,maynotbeassociatedpersonsofthememberandmaynotbesubjecttoFINRArestrictionson

communicationswithasubjectcompany,publicappearancesandtradingsecuritiesheldbyaresearchanalystaccount.

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•Chinaisgeographicallylarge,andoffersmanyattractionsincludingitshistory,

landscape,cultureandartresources.

•Ithasinvestedininfrastructure,telecomsandthetransportationsystem,whichmakesdomestictraveleasierforforeignvisitors;High-speedrailprovidesagoodtransportoptionfortouriststravellingshortdistancesbutdon'tprefertodrive.

•Airqualityhasimprovedalongwithenvironmentalprotections.

•DespiteasimilardomestictourismcontributiontoGDPastheUS,westillthinkChina'stourismresourcesareunder-utilizedduetolongworkinghoursoflocalresidents,whichimpliesbandwidthtoaccommodatemorevisitors.

•Specifically,infrastructureupgradestofacilitateinternationaltourisminChinahavebeenmadeatairportsandhigh-speedrailstations,accordingtoour

observation.

MorganStanleyResearch

Policymakersaremakingeffortstoattractglobaltravellers

Chinahasundertakenaseriesofpolicymovesthatwethinkindicatethegovernment'swillingnesstoencourageinboundtourism.Theseinclude:

•InNov-23,Chinaannouncedaseriesofvisarelaxationpoliciesfor15Asianand

Europeancountries;

•Providingeasierdigitalpaymentoptionsfortourists,intermsofconnectingdigitalpaymentplatformswithglobalcreditcards,aswellasprovidinganexemptiontonotuploadpersonalidentitydocumentswhenusingChinesedigitalpayment

platforms;

•Upgradingonlinerailwayticketingsystemstobemoreuser-friendlytointernationalvisitorsintermsoflanguageandpaymentsettings.

Therehasbeenapick-upintouristarrivals

Wehighlightsomeencouragingobservationsduringthepastquarter:

•China'sinternationalpassengertrafficresumptionhasspeededupsinceNov-23,perdatafromCAAC.AsChina'soutboundrecoveryhasbeenstagnant,webelievethisimprovementintrafficresumptionismainlydrivenbyinbound.

•Foreignarrivalsincreasedbyover300%YoYin1Q24,comparedtoa100%+YoYincreaseinoutboundChineseandinboundHK/Macauresidents.

WhywethinkHongKongresidents'tripstoChinaarerelevant

ThecontrastbetweenHongKong'sinflationarypressure,vs.China'sdeflationhas

attractedconsumersfromHongKongtoGuangdongandothernearbyprovincesinChina.Bycomparingthiswithcross-bordervisitationfromSingaporetoMalaysia,weconcludethat:

•BeforeCovid-19,HongKongvisitationtoChinawaslargely'low-quality'travel-

frequentbutwithverylowspending,andwethinktherewerealsoarelativelyhighpercentageofdaigous(cross-borderindividualexporters)vs.genuinetourists.

•DuetoRmbdepreciationandstrictercontrolsatChina'scustoms,wearguethatwhiletotalHongKongvisitornumbershavenotyetgonesignificantlyabovepre-Covid,the'quality'ofHongKong'svisitationhassignificantlyimproved,i.e.,higher

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2033E

2010-2019:1%

2019

2010-2019:5%

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907

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130150172

2%3%4%

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108

142

AsiaPacificInsight

spending.

HongKongandMacauvisitationaccountedfor75%ofChina'sinboundvisitors,

contributing30%oftotaltourismrevenuein2019,perdatafromChina'sMinistryof

CultureandTourism.UsingSingaporean'stravelspendinginMalaysiaasareference,webelieveHongKongvisitors'perheadspendingcandoublefromitscurrentlevel,iftheyareallgenuinetourists.

Howdowepictureupside?

KeyfactsofChina'sinboundvisitation

WehighlightafewcharacteristicsofChina'sinboundvisitation:

•Sourceoforigin:OverseastouristsandTaiwanresidentsaccountedfor~25%oftotalvisitationin2019,butcontributed~70%ofinboundrevenuebeforeCovid;

•Spending:US$2400-2,600pertripforinternationalandTaiwanvisitors,vs.~US$350forHK/Macauvisitors;

•Purpose:Businesstravellershavedeclinedfrom25%ofthetotal20yearsago,to~15%in2019;leisurehasfluctuatedintheperiod,butaccountedfor~35%oftotaltravellersasof2019;

•Asiavisitationaccountedfor60%oftotalforeignvisitationsin2019.

Weseeamulti-trilliondollaropportunityinthenext10years

Weseetwomajordrivers:Moreforeignvisitors,andhigherspendingqualityfromHK/Macauvisitors.Inourbasecase,weseepotentialforChinatoexpandthecontributionfrominboundtourismfrom0.9%ofGDPin2019to~2%ofGDPin2033,andinourbullcasethiscouldreach~4%ofGDP.

Exhibit1:EstimateofChina'sinboundtourismrevenuein2033

GlobalInternationalTouristsCAGR(2024-2033)

Globalinternationaltourists(mn)*

China'sshareinglobalinternationaltourists

China'sinternationaltourists(mn)

PerheadspendingCAGR(2019-2033)

Perheadspending-internationaltravellersinChina(USD)

TourismRevenue-internationaltravellers(USDbn)

China'stouristsfromHK,MacauandTaiwanCAGR(2019-2033)

China'stouristsfromHK,MacauandTaiwan(mn)

PerheadspendingCAGR(2019-2033)

Perheadspending-HK,MacauandTaiwanTourists(USD)

TourismRevenue-HK,MacauandTaiwantourists(USDbn)

1,049

131

260

539

China-totaltourismrevenue(USDbn)

Upsidesvs.2019(USDbn)

129

408

918

Upsidesvs.2023(USDbn)

207

486

996

ImpliedCAGR2019-2033

5%

11%

16%

Accumulativerevenueduring2024-2033(USDtrillion)

1.7

2.8

4.5

Source:MorganStanley(E)estimates.*Note:wehaveexcludedvisitorsfromHK,MacauandTaiwantomainlandChinafromglobalinternationaltourists.

Whichindustriescouldbenefit?

Transportation,lodging,travelagencies,andretail(internet)wouldbethemajor

beneficiariesofthisinflux.However,wealsohighlightthatHKproperty/retailcould

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potentiallybehurtasaresult.

Keyareasofimprovement:

WehighlightareaswhereChinaisstilllookingtoimproveitsinboundtourism:

•Visapolicies:ComparedwithitsAsiapeers,Chinacouldexpanditsvisa-freetravel

tomorecountries;

•Language:Moreforeignlanguage-speakingemployeesinthetourismindustry;Foreign-languageindicatorsatpublictransportationhubs.

•Payment:Allowingeasierpaymentforinternationaltouristsusingglobalcreditcardsorcash.

•Lodging:Fewerrestrictionsonhotelstoaccommodateinternationaltourists.

•Informationandtechnology:Easieraccesstoinformationsuchasmaps,socialmedia,languagetoolsetc.

•BetteradvertisementsaboutChina'stourismandculturetoglobaltourists.

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KeyCharts

Exhibit2:China'sserviceexportshavelaggeditsgoods

exports

16.0%

14.0%

12.0%

10.0%

8.0%

6.0%

4.0%

2.0%

0.0%

China:%sharesinworldserviceexportsChina:%ofsharesingoodsexport

Source:WorldBank,ChinaMinistryofCommerce,MorganStanleyResearch

Exhibit4:HK/Macauvisitationleadstheinboundrecovery...

CN:Entry-ExitPassenger:2023vs.2019

120%

110%

100%

90%

80%

70%

60%

50%

40%

30%

20%

HK,Macauand

TaiwanCompatriot

InternationalVisitors

TotalMainland

Residents

2023vs.20192023vs.20181Q24vs.1Q19

Source:ChinaNationalImmigrationAdministration,MorganStanleyEstimation.Note:foreigntravellers'recoverycalculationhasexcludedborderresidents.

Exhibit3:...butinternationaltourismcouldbringextensiveupside

TourismandTravelRevContribution

France

UK

Thailand

Japan

US

China

World

34%

17%

71%

19%

16%

10%

28%

0%20%40%60%80%100%

DomesticInternational

Source:WorldTravel&TourismCouncil,ChinaMinistryofCultureandTourism,MorganStanleyEstimation.Note:visitsfromHKandMacauarecountedasChinadomestic.

Exhibit5:...andstronglysupportedretailconsumptioninChinaduringtheChingMingholiday

Perheadconsumption(Rmb)

520.0

500.0

480.0

460.0

440.0

420.0

400.0

380.0

+19%

-2%

+1%

ChinatotalGuangdongChinaexcludingGuangdong

20192024

Source:ChinaMinistryofCultureandTourism,DepartmentofCultureandTourismofGuangdong,MorganStanleyResearch

Morganstanley

RESEARCH

AsiaPacificInsight

Exhibit6:InternationalvisitationhasspeededupsinceChinastartedtoallowvisa-freetravelfrommorecountries

90%80%70%60%50%40%30%20%10%

0%

Jan-23

Feb-23

Mar-23

Apr-23

May-23

Jun-23

Jul-23

Aug-23

Sep-23

Oct-23

Nov-23

Dec-23

Jan-24

Feb-24

Mar-24

China:non-domesticpaxvs.pre-Covid

Chinastartedtoincreasethescopeofforeignvisitors'visa-freeentrance

—Regional(HK,Macau,TW)vs.2019—Internationalvs.2019

Source:ChinaCivilAviationAdministration,MorganStanleyResearch

Exhibit7:China:potentialupsidefrominboundtourism

revenue

1,200

1,000

800

600

400

200

-

Inboundtourismrevenue(bnUSD)

CAGR=16%

CAGR=11%

CAGR=5%

2023

2019

2033bear2033base2033bull

TourismRevenue-HK,MacauandTaiwanTourists

lTourismRevenue-InternationalTourists

Source:MorganStanleyEstimates

MorganStanleyResearch7

8

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RESEARCH

AsiaPacificInsight

InboundTourism:AnotherDriverofChina'sExportGrowth?

ExtensiveupsidepotentialinChina'smarketshareinglobalserviceexports

Chinahastripleditsmarketshareinglobalgoodsexportsinthepasttwodecades...

In2000,China'sshareofglobalgoodsexportswasonly4%.Ittooksixyearstodoublethisandanotherseventotripleit(Exhibit8).But,in2023,China'sshareofglobalgoodsexportswas14%,downfrom15%in2021amidincreasedglobaltradetensions(Exhibit9).

Exhibit8:Chinaexpandeditsshareofglobalgoodsexportsfrom4%to15%in20years...

China:%sharesinworldexports(FOB)

16.0%14.0%12.0%10.0%8.0%6.0%4.0%2.0%

0.0%

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marketsharex2

marketsharex3.9

marketsharex3

Source:IMF,MorganStanleyResearch

Exhibit9:...However,tradetensionshaveemergedsince2017-

18

25%

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_____China:marketshareinUSgoodsimports--China:populationas%ofworld

Source:USconsensusbureau;MorganStanleyResearch.Note:China'ssharecalculationincludesHongKong.

...butitsshareofglobalservicesexportsremainedlow

Despiteitsaggressivemarketsharegainsinglobalgoodsexports,China'smarketshareexpansionintermsofserviceexportsappearstobeslow.Wenotethatamongglobalserviceexports,travel-relatedservicesaccountfor~40%ofthetotalmarket.

Comparedwiththerestofthepie,namelyITservices,financialservices,intellectualpropertycharges,etc.,webelievetourismandtravelistheareawhereChinahasabetteropportunitytoexpanditsshareintheglobalmarket,withlimitedchallengesfrominformationsecurityconcernsandpotentialtradefriction.

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2.0%1.0%

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AsiaPacificInsight

Exhibit10:China'sshareinglobalserviceexportsincreasedto6%in2021,vs.1.8%in2000

China:%sharesinworldserviceexports

Source:WorldBank,ChinaMinistryofCommerce,MorganStanleyResearch

Exhibit11:~40%ofworldservicesexportsaretravelrelated

Worldservicesexportsbyservicecategory,(US$,bn)

17%

17%

21%

25%

23%

1

6%

58%

60%

63%

-1,0002,0003,0004,0005,0006,0007,0008,000

TransportTravelOtherServices

Source:UnitedNationsConferenceonTradeandDevelopment

WeseesignificantupsidepotentialfromthecurrentlevelforChina'sinboundtourism

Specifically,intermsofinternationaltourists,China'sglobalshareremainslow,with

sustainedmarketsharelossesduringthepastdecade.ExcludingvisitorsfromHK,MacauandTaiwan,Chinaonlyhad~2.4%shareofglobaltouristsin2019,andweestimateit

droppedto1%in2023.

Exhibit12:IntheUS,serviceexportsaccountfor~30%oftotalexportsduringthepastdecade

US:serviceas%oftotalexports

40%

35%

30%

25%

20%

15%

10%

5%

0%

Source:USConsensusBureau,MorganStanleyResearch

Exhibit13:China'sshareofglobaltouristsfellto1%in2023,from2.4%in2019

16.0%

14.0%

12.0%

10.0%

8.0%

6.0%

4.0%

2.0%

0.0%

China:%sharesinworldinternationaltourists

China:%sharesinworldinternationaltourists(excludingHK,Macau,andTaiwan)

Source:TheWorldTourismOrganization(UNTourism),ChinaMinistryofCultureandTourism,MorganStanleyResearch.

SupportingChina'sGDPgrowth

Lowerinboundvisitationhaderoded0.6%ofChina'sGDPvs.pre-Covid

In2023,China'stotalinboundvisitorarrivalsreached56%ofits2019level,accordingtotheMinistryofCultureandTourism.Specifically,foreignvisitationdroppedby57%vs.pre-Covid,andaccountedfor17%oftotalinboundtourists,vs.22%pre-Covid.Thissawthelossof~US$78bnintourismrevenueforChina,or0.6%ofChina's2019GDP.

MorganStanleyResearch9

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UnitedStates

China

UnitedKingdom

Germany

Japan

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Italy

Thailand

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UnitedArab

Emirates

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Morganstanley

RESEARCH

AsiaPacificInsight

Exhibit14:GDPcontributionfrominboundtourismdroppedto0.3%in2023,vs.0.9%in2019

1.6%1.4%1.2%1.0%0.8%0.6%0.4%0.2%

0.0%

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CN:tourismrevenuefrominboundvisitation/GDP

1.1%

0.6%

CN:tourismrevenuefrominboundvisitation/GDP

Source:ChinaMinistryofCultureandTourism,CEIC,MorganStanleyResearch.Note:includingspendingbyHK,MacauandTaiwanvisitors.

Exhibit15:...withthemostsignificantdropfromforeignvisitation

140.0

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CN:InboundVisitorsbyAreaofOrigin(2010=100)

TotalvisitorsInternationalHK/Macau/Taiwan

Source:ChinaMinistryofCultureandTourism,CEIC,MorganStanleyResearch

China'sfullreopeningarrivedlaterthaninotherregions,andsohaslaggedthe

internationalcapacityresumptionintermsofavailableseatkilometers.However,besidesaircapacityconstraints,wehaveobservedthatChina'soutboundtravelhasresumed

fasterthaninboundvisitation-witha60%recoveryin2023,vs.43%forinboundtourists.

Exhibit16:ChinafelltoNo.9inglobalconnectivityrankingsin2023,vs.No.2in2019

InternationalConnectivityIndex

4

30%

2

0

0%

-2

-4

-30%

-6

-8

-60%

Growth2019-2023Ranking2019-2023

Source:IATA,MorganStanleyResearch

Exhibit17:China'snon-domestic~70%ofpre-Covidlevels

China:non-domestic

10000

aircapacityhasresumedto

capacityrecovery

80%

9000

8000

7000

6000

5000

4000

3000

2000

1000

0

70%60%50%40%30%20%10%

0%

Chinanon-domesticASK(mn)—China-Non-domesticASKvs.2019

Source:OAG,MorganStanleyResearch

RoomtoboostGDPbybringingmoreinboundvisitors

IntheUS,thedomestictourismindustry'scontributiontoGDPwasat~4.5%in2019vs.~5.8%inChina,whichwethinkarelargelycomparable.

AlthoughGDPcontributionfrominternationaltravelwasonly1.1%intheUSin2019,thiswashigherthanthe0.9%inChina(0.7%excludingHKandMacauresidents),andwearguethattherelativeincomelevelsfrominboundvisitorscomparedwithdomesticconsumersvariessignificantlybetweenChinaandtheUS.Thatsaid,webelievepotentialinbound

tourismconsumption'scontributiontoChina'seconomycouldbemuchlargerthanthattotheUS,asChina'sinboundvisitorsare'richer'vs.theUS,consideringtheirrelativeincomelevelvs.respectivelocalincome.

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2.0%

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Exhibit18:DomestictourismGDPcontributionlargely

comparablebetweenChinaandtheUS

DomesticTourismGDPContribution

7.0%

6.0%

5.0%

4.0%

3.0%

ChinadomestictourismUSdomestictourism

Source:ChinaGeneralAdministrationofCustoms,ChinaMinistryofCultureandTourism,CEIC,MorganStanleyResearch

Exhibit20:Potentialvisitors'income/domesticincome:Chinavs.theUS

PerCapitaGDP:domesticvs.world

250%

200%

150%

100%

50%

0%

WorldAverage/USWorldAverage/China

Source:BureauofEconomicAnalysis,CEICdata,MorganStanleyResearch

Exhibit19:...butChinageneratedsmaller%ofGDPfrominboundtourismvs.theUS

InboundTourismGDPContribution

1.6%1.4%1.2%1.0%0.8%0.6%0.4%0.2%

0.0%

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ChinaUSChinaexcludingHK/Macauresidents

Source:ChinaGeneralAdministrationofCustoms,ChinaMinistryofCultureandTourism,WorldBank,CEICdata,MorganStanleyResearch

Exhibit21:China'stourismrevenuecontributionfrominternationalisstillsmallvs.globalaverage

TourismandTravelRevContribution

France

UK

Thailand

Japan

US

China

World

34%

17%

71%

19%

16%

10%

28%

0%20%40%60%80%100%

DomesticInternational

Source:WorldTravel&TourismCouncil,ChinaMinistryofCultureandTourism,MorganStanleyEstimation.Note:visitsfromHKandMacauarecountedasChinadomestic.

...andcouldcreate>5%morejobs

China'semploymentpeakedin2014andhasfallensincethen.In2023,China'stotal

employmentwas3%belowthelevelin2014,andemployment/populationwas4.6pptlowercomparedwith20yearsago.

Thishasbeenledbyloweremploymentinprimaryandsecondaryindustries,down~50%and~10%respectively,fromtheirrespectivepeaksoverthepasttwodecades,buthas

beenlargelyabsorbedbytertiaryindustry,whichexpandeditsemploymentbyover70%inthesameperiod.

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Exhibit22:China:employment(mn)

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CN:Employment(mn)CN:Employment/population

Source:ChinaMinistryofHumanResourcesandSocialSecurity,CEIC,MorganStanleyResearch

58%

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49%

Exhibit23:China:employmentbyindustry(mn)

800

700

600

500

400

300

200

100

0

CN:Employment:SecondaryIndustry

CN:Employment:PrimaryIndustry

CN:Employment:TertiaryIndustry

Source:ChinaMinistryofHumanResourcesandSocialSecurity,CEIC,MorganStanleyResearch

Specifically,inthetourismindustry,China'semploymentlevelsaresignificantlylowercomparedwithpeercountries.In2019,China'stourismindustryemployeesonly

accountedfor0.2%ofthetotalpopulation,or0.3%oftheurbanpopulation,comparedwith2.7%intheUS,and4.7%inJapan.

WeestimatethatifChinacancreatejobsequalto2.7%ofthetotalpopulationfromthetourismindustry,similartoUS's2019level,itcouldmean35mnmorejobs,or5%of

China'scurrenttotalemployment.

Exhibit24:China:tourismemploymentaccountedforlessthan0.5%oftotalpopulation

CN:TourismIndustr