Chinese Economy Benefits from Policy Initiatives to Strengthen
Domestic Consumer Demand
(Shanghai, April 15th 2013) – The Global Business Travel Association (GBTA) has released the results of its third GBTA BTI™ Outlook – China 2013 H1 report, a semi-annual analysis of one of the largest business travel markets in the world.
The report, sponsored by Visa, includes the GBTA BTI™; an index of business travel spending that distils market performance over a defined period.
Highlights
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After expanding by 7.8% in 2012, China’s economy should continue to usher the world out of its economic slowdown. GBTA forecasts that China’s GDP will increase by 8.3% in 2013, with growth predicted to be just below 9% in 2014
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The Chinese authorities remain committed to rebalancing the economy to stimulate domestic investment and consumer demand
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China’s total business travel spending increased by an average 15.5% per year from 2000 to 2012. Building on this impressive performance, business travel spending is forecast to increase by 15.1% in 2013 to $226 billion (RMB1,379 billion). The projected expansion of 16.9% in 2014 is more than twice the rate of the U.S.
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Domestic business travel will outperform international outbound (IOB). In 2013, domestic travel spend should grow by 15.2%, with an increase of 16.9% in 2014
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Growth in IOB is forecast to pick up slightly following a marked slowdown in 2011 and 2012. In 2013, IOB is expected to grow 13.3%, followed by 16.3% in 2014
Welf J. Ebeling, Vice President Operations, GBTA Asia remarked: “Although economic growth has been moderated by ongoing global uncertainty, the Chinese economy is regaining its momentum. A range of government policy initiatives, which began last year, should deliver improved economic performance in 2013 and 2014. As a result, we are confident that stronger domestic demand will spur renewed growth in business travel spending. At the forecasted growth rates, China is likely to become the largest business travel market in the world as early as 2015.”
As China’s economy has grown, so has its business travel market with China experiencing more than a 15% annual growth rate since 2000,” said Tad Fordyce, head of global commercial solutions at Visa Inc. “With Chinese business travel forecast to continue its strong growth in the coming years, China is projected to become the top business travel market in the world as early as 2015.”
Sustained economic growth enhances business travel outlook
The Chinese economy managed a soft landing in 2012 despite the drag on its export sector caused by the protracted slowdown in Europe and the U.S. Export growth remains vital to China’s economic prospects, and neighboring countries are taking up part of the shortfall, such as Malaysia, Taiwan, Singapore and Vietnam. To counteract diminished international trade, prudent monetary and fiscal policies are designed to stimulate domestic consumer demand. With China’s formal transfer of leadership completed in March 2013, President Xi Jinping has confirmed the government will continue to pursue qualitative growth by rebalancing the economy.
China’s sustained, if slightly weaker, GDP growth means the outlook for business travel is still very positive. The combination of an expected recovery in global markets and rising domestic consumption should yield further positivity. GBTA forecasts a 15.1% increase in total business travel spend in 2013, although stronger spending in the third and fourth quarters will offset comparatively tepid growth in the first half of the year.
Continued growth in business travel spend
Domestic travel has been performing better than international outbound over the last two years. GBTA expects this trend to continue as firms maneuver to serve rapidly growing markets across China. Domestic travel spend is projected to grow by 15.2% in 2013, and by 16.9% in 2014. In comparison, international outbound business travel from China has slowed considerably, with total IOB travel spending falling to 11.8% in 2011, and 10.9% in 2012. Growth is likely to recover to 13.3% in 2013, and a stronger 16.3% in 2014 – though still far removed from the surging IOB growth witnessed during the first decade of the millennium.
Overall, Chinese business travel spending boasts high potential growth. In the 12 quarters since the global recession ended in Q4 of 2009, the GBTA BTI™ in China has added 122 points. Larger gains are forecast for the next two years. A predicted expansion of 63 points in 2013 will be followed by growth of 78 points in 2014, resulting in China eclipsing the 500 mark for the first time during the fourth quarter. Some of this growth will come from rising travel prices, perhaps as much as 6-8%, but the remainder represents real increases in trip volume and spend-per-trip. If these growth rates were achieved, China would overtake the U.S. as the largest business travel market in the world in 2015.
