China opens domestic travel market to foreign travel agencies

China’s entry to the World Trade Organization opens new opportunities in tourism.
China has announced it will soon "fully open" its domestic travel market to foreign-owned travel agencies. Four months ahead of China's scheduled November deadline under terms set by its entry into the World Trade Organization (WTO), foreign-funded travel agencies beginning July 1 will soon be able to set up subsidiary offices without restrictions, in addition to easing of capital requirements. An agency presently requires only about US$40,000 capital requirements to set up an office in the Chinese domestic market.

Confirming the government’s decision, Shao Qiwei, head of the China National National Tourism Administration (CNTA), said: “We welcome the entry of the world’s big tourism companies and well-known brand names into China. It will help to enhance the competitiveness of Chinese tourism companies.”

In the past five years, 25 foreign-funded travel agencies have set up offices in China.

“Travel has now become a popular consumption in China,” added Li Zhiran from CNTA. “Traditional sightseeing is giving way to travel for the purpose of leisure.”

Song Rui, a tourism scholar with the Chinese Academy of Social Sciences, told China Daily, “More people are seeking leisure activities to ease the pressures of daily life. People are now pursuing quality travel not just for sightseeing, and that demand is being met by the variety of tourism products in the market, the level set by developed countries.”

To encourage the industry’s development, CNTA is encouraging travel agencies to offer more travel products and service providers to upgrade service standards.

Not perturbed by the anticipated competition to its dominance in the local market, some established large local Chinese travel agencies do not see an easy entry for foreign agencies to start operations in China’s domestic market.

Yao Yuecan, president of the China International Travel Services, said small agencies are cutting prices to compete against traditional state-owned agencies. “It is not easy to survive in China’s market with a limited profit margin.”

Yao also sees the possibility of foreign agencies merging or taking over the operations of small agencies, forcing the market to be more competitive.

Official statistics show China has the largest domestic tourism market in the world, registering 1.3 billion travelers in 2006 and further set to grow to 1.7 billion by 2010.

May 25, 2007   Posted in: China