It’s a familiar story: We’re spending ourselves broke, to China’s benefit. Americans are addicted to the low prices afforded by Foxconn factories from Shenzhen to Wuhan. We’ve outsourced our jobs, hollowed out our manufacturing sector, and put the squeeze on the American workers whose consumption drives our economy.
There’s some truth in that fear. But it misses a much bigger issue: that the emerging Chinese middle class will soon outstrip America’s by several multiples. The good news is that affluent Chinese would love to spend money in America. The bad news is that we’re not making it easy. When it comes to China, tourism may be the biggest opportunity America is blowing: economically, politically, and geo-strategically.
The emergence of more than 1 billion Chinese into the global middle class over the next few decades will be the driving cultural force of the 21st century, and it’s hard to understate the importance of tourism in that equation. The tourism industry employed 266 million people and earned $7 trillion in 2013, accounting for 9.5 percent of the world’s economy and 9 percent of its workforce. Chinese tourists took 83 million trips in 2012 and spent $102 billion overseas (up 40 percent from 2011), making China the largest source of tourists worldwide. But that number pales in comparison to tourism within China: Business trips and spending alone exceeded $200 billion in 2013, up 14 percent year over year. China’s business travel market—hotels, airports, rental cars, etc.—will overtake America’s by 2016, and China will be the world’s largest overall tourist economy by 2027.
It’s easy to chalk this up to size: China has more than four times the population of the U.S., and its biggest cities dwarf their American counterparts. But even on a per capita basis, China is starting to outcompete the U.S. The average visitor to Las Vegas spends about $1,600 per trip; the average visitor to Macau spends $3,200.
It’s not that the U.S. isn’t benefiting from Chinese tourism: CNN reports that the number of Chinese tourists to the U.S. jumped from 400,000 in 2007 to almost 1.5 million in 2012. According to the U.S. Commerce Department, Chinese visitors spent $9 billion in the U.S. in 2012. Shopping, not sightseeing, is their favorite tourist activity—luxury department stores in posh areas like Beverly Hills’ Rodeo Drive are seeing as much as 60 percent of their annual business come from Chinese tourists, and many are now accepting Chinese credit cards like UnionPay.
Nine billion’s not bad, but our take could be bigger—perhaps by an order of magnitude. According to analysis by Robert Lawson and colleagues at Southern Methodist University, the U.S. could increase tourism by 45 million to 67 million visitors and earn an additional $90 billion to $123 billion in visitor spending by eliminating restrictions on tourist visas. Visa requirements for Chinese tourists are particularly onerous, and removing them could make our country more accessible and attractive.
As Bloomberg Businessweek puts it:
Demanding a visa from a country’s travelers in advance is associated with a 70 percent lower level of tourist entries than from a similar country where there is no visa requirement. The U.S. requires an advance visa from citizens of 81 percent of the world’s countries.