General Introduction

In 2005, the number of travel agencies in China was 16,846, among which 1,507 were newly founded, increasing 9.82% than 2004. The number of international agencies increased 118, up 18.02% than 2004. The total asset of travel agencies all over China was RMB 41.926 billion, declining by 1.21% than 2004, RMB 23.202 billion were in debt, decreasing by 0.77% than 2004.

The development target of China tourism program during the Eleventh Five-year Plan period is: the average annual growth of the inbound tourist, the inbound tourist staying overnight, and domestic tourist all increase by 8%, with the average annual revenue from international & domestic tourism rising by 12% and 10% respectively. By 2010, the income from international and domestic tourism is expected to hit USD 53 billion and RMB 850 separately, and the total tourism revenue is expected to hit RMB 1.27 trillion. The tourism industry absorbs 500,000 employees each year, and the total number of the direct employment will reach 10 million by 2010.

In China tourism market, the fierce competition will drive the asset integrations; will lead to a decline of anticipated profit rate, yet more new investment opportunities will be brought by the internal restructure. On one hand, the acquisition & reorganization of the tourism industry needs the participation of large-scale social capital and financial institutions. On the other hand, the development & innovation of tourism products will cultivate new investment fields; earlier entrants will gain considerable profits.

According to the plan by China National Tourism Administration, the number of inbound tourists, foreign exchange earnings from tourism and the domestic market size are targeted to have an annual growth of 4%, 8% and 8%, respectively, in the next five to ten years. It is also forecasted by the World Tourism Organization (WTO) that China's tourism industry will take up to 8.6% of world market share to become the world's top tourism industry by 2020.

The booming tourism industry has played a vital role in increasing consumption, reducing poverty and creating job opportunities.

The China National Tourism Administration, the industrial watchdog, expects the tourism industry to provide 40 million jobs in the coming decade. In addition, the industry has received an influx of overseas capital in the last two years.

It predicted that most local travel agencies will accelerate the pace of their restructuring next year in order to face the new challenges posed by China's entry into the World Trade Organization.

There are several changes concerning China's tourism industry:

Inbound Market

The total number of inbound tourists was 91.66 million in 2003, and that of tourists staying overnight was 32.7 million, about 10 times of the number in 1980. International tourism receipts were USD 17.4 billion in 2003. China's ranking for both the overnight tourist arrivals and tourism receipts were among the world's top five in 2003. However, there is unlikely to be a big increase in the inbound tourism market.

Location

East Asia, on the west coast of Pacific Ocean

Domestic Market

China's domestic tourism market makes up more than 90% of the country's tourism traffic, and contributes more than 70% of total tourism revenue. In 2002, domestic tourists reached 878 million and tourism revenue was USD 46.9 billion. The five-days-per-week and long vacation schemes have increased leisure time for the Chinese people and spurred market demand in domestic tourism and led to its prosperity.

Outbound Market

A large middle class population with strong consumption power is emerging in China, especially in major cities. China's outbound tourists reached 20.22 million in 2003, overtaking Japan for the first time. Currently there are 65 countries/areas open to Chinese tour groups. Putting aside the threat of Sars and other unexpected events, based on the current economic growth situation and the social development of China, China's outbound tourism is poised to achieve a new growth peak.

Hotel

Driven by the flourishing tourism industry, China's tourist hotel sector is expanding rapidly. At the end of 2003, China had a total of 10,093 tourist hotels and more than 820,000 rooms. 773 of these tourist hotels were foreign-funded. The number of foreign-funded (inclusive of Hong Kong, Macau and Taiwan investments) four- and five-star tourist hotels made up 26% and 30.02% of the national total, respectively.

Travel Agencies

In 2003, there were a total of 11,522 travel agencies in China, among which, 1,349 were international ones and 10,203 were domestic ones. While overall tourism market concentration rose, there was a drop in the market position of the traditional three key travel agencies. As competition heightened, China's tourism industry on the whole, had begun to start earning low profits, even while it was expanding its scale of operations.

Tourist Attractions

Currently, there are approximately 15,000 natural, cultural and man-made places of attraction which are above county level. Presently, Hong Kong investors are the main participants in the establishment of tourist attractions in China.

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