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When China wakes up, the world will travelA statistic survey and legal perspectivebyRobert BIJLOOS and Shenghui LU, LPA, Lawyers
“When China wakes up, the world will tremble”, a famous Frenchman once said. For this article we will paraphrase that to: “When China wakes up, the world will travel.” And the world will travel in every sense: foreign people — including those from the Hong Kong SAR, the Macau SAR and Taiwan — will travel in China (inbound tourism); Chinese nationals will travel in China (domestic tourism); and Chinese nationals will travel abroad (outbound tourism). In order to promote the tourism industry, the Chinese government has defined it as a “new growth point of the national economy”. The National Tourism Administration (CNTA), an organisation directly subordinated to the State Council, has been charged with the administration of the tourist industry in China. Chinese people have woken up to tourism, both economically — in that they have discovered it is a money-maker — and personally, in that they are starting to take pleasure in travel themselves. About 24 of the 31 provinces, municipalities and autonomous regions have made tourism one of their pillar industries, while Hong Kong and Macau are already well-established international destinations. China has already introduced a ranking system for its tourism areas, selecting the Top Chinese Tourist Cities according to standards formulated in collaboration with the World Tourism Organisation. Travel agencies in China have increased both in number and size. By the end of 2001, there were 10,532 travel agencies, of which 1,310 (42 more than that in 2000) deal with international travel services and 9,222 (1,497 more than that in 2000) organise domestic tourism. With the exception of travel agencies, almost every sub-sector of the tourism industry has largely opened up to foreign businesses, particularly hotels. By 2001, foreign investment in star-rated hotels amounted to 592 out of a total of 7,358 star-rated hotels in China. However, by the end of 2001, only about 11 joint-venture travel agencies had been set up in China. The two most recent are CITS-AE Travel Agency (which was jointly established by China International Travel Service and American Express Company), and Comfort-Rosenbluth Business Travel Service (Rosenbluth Company and China Comfort Travel Company). Only one of them co-operates with the European Accor Group. Other joint-venture projects with US, Europe and Japan are still under negotiation. Following its accession to WTO, China is committed to opening up its tourism industry. A brief statistical survey (I) illustrates how Chinese tourism is already expanding. Moreover, a much greater perspective has been achieved by recent changes to relevant rules and regulations in China (II). I. Statistical survey China’ tourism industry began to emerge during the country’s economic reforms and opening-up policy of late 1978, and China joined the World Tourism Organisation in 1983. Since then, growth has been being steady. Furthermore, over the past year, China has bucked the global trend of depressed tourism in the wake of 9/11. Tourism revenue for 2001 reached 499.5 billion yuan (US$60.18 billion), an increase of 10.5% over 2000. This amount included foreign currency earnings of US$17.8 billion from overseas tourists and 352.2 billion yuan (US$42.5 billion) from domestic tourism. 1. Inbound tourism In 1978, the total inbound arrivals were 1.81 million, generating only US$0.26 billion. However, overseas tourists coming to China have been increasing by at least 1 million a year. Inbound tourism arrivals and receipts
N.B.: Arrivals (million), receipts (US$ billion) and % (from previous year) and US$1 ≈ RMB8.23 yuan. Statistic information in this article refers to CNTA: www.cnta.com According to the classification by the World Tourism Organisation, in1980 China was ranked 18th among world tourist destinations in terms of arrivals and 34th in terms of revenue. Nearly twenty years later, in 1999, China was already the fifth in terms of arrivals and seventh in terms of revenue. 2. Domestic tourism The development of domestic tourism has been greatly boosted by a decree of 21 June 2000 issued by the State Council which says Chinese people may enjoy three “golden weeks”. These are three seven-day holidays around the Spring Festival (Chinese New Year), International Labour Day (the 1 May) and National Day (1 October). The idea was to give people time to spend their money, and it has worked. During last year’s “Golden Weeks”, the number of domestic tourists reached 180 million, generating total tourism receipts of 73.6 billion yuan. 3. Outbound tourism In 2000, Chinese citizens made 10.47 million departures to travel abroad, up 13.43% from 1999. Last year, Chinese nationals made 12.13 million departures to travel abroad, up 15.9% from 2000. At the moment, only about 15 countries are open to Chinese nationals and so far most have travelled only to the Asia-Pacific region — especially Hong Kong, Macau and Japan. However, all 130-plus countries in the WTO will become potential destinations after 2005. Further, outbound tourism has been made easier since February 27 this year, when the State Council issued specific administrative regulations (“methods”) lifting many of the existing restrictions on Chinese travelling abroad. Such moves are promising for European investors, who will soon be authorised to engage in business activities in tourism in China. II. Legal perspective Beijing’s government has accelerated the development of tourism in China by implementing new polices. One policy, introduced last year, stated that China must act on its new open-door policy and attract capital from foreign countries — including Hong Kong, Macao and Taiwan — to help develop tourism resources. These include setting up Sino-foreign travel agencies, a tourist transportation network and hotels. In fact, at national level, more than 100 regulations, or “Methods” to facilitate tourism have been drawn up. 1. Representative office Two ministerial Methods focus in particular on regulating the establishment of representative offices in China by public organisations and by private companies. The first is the Interim Methods on Administrating the Establishment of Resident Representative Offices in China by Tourist Departments of Foreign Countries, which was issued by CNTA on 30 June 1998 and still remains in force. The second is the Methods on the Administration of Approving the Establishment of Resident Representative Offices in China by Foreign Tourist Enterprises (issued by CNTA on 5t May 1994), which is classified as one of several regulations to be amended in the near future. Otherwise, Article 2 of the Ordinance on the Administration of Travel Agencies (amended by the State Council on 11 December 2001), applies also to the representative offices set up by foreign tourism companies in China. According to Article 16, the representative offices set up by foreign travel agencies in China are authorised to carry out tourist advice, liaison and promotion activities but shall not engage in tourism transactions. However, for foreign companies interested in direct investment (joint venture) in China’s tourism market, the most important changes arise from the Ordinance on the Administration of Travel Agencies initially promulgated by the State Council on 15 October 1996 and substantially amended on 11 December 2001. 2. Joint-venture travel? agencies Back in 1993, the CNTA first issued regulations authorizing the establishment of joint-venture travel agent agencies in inbound tourism with harsh geographic restrictions. In 1998, CNTA and MOFTEC jointly issued Interim Experimental Methods on Sino-foreign Joint-Venture Travel Agencies — to authorise joint-venture travel agencies without geographic limits. By abrogating the specific methods of 1998, the new Ordinance sets out to lessen restrictions and consolidate the possibility of equity joint-venture travel agencies, as well as authorising the legal solution of contractual joint-venture travel agencies. It applies also to such agencies established in the Mainland by Hong Kong, Macau and Taiwanese companies. The minimum registered capital for starting a joint-venture travel agency is 4 million yuan. The foreign travel agency shall have a total annual turnover of not less than US$40 million. Foreign investment travel agencies are authorised to transact business in inbound and domestic tourism, but not as yet in outbound tourism, although this restriction will be altered after 2005. Under the new Ordinance, investors can apply directly to the CNTA and the MOFTEC to establish a joint-venture travel agency. The Ordinance applies both to all kinds of travel agencies and to the representative offices set up by foreign tourism companies in China. Furthermore, as its title indicates clearly, the new Ordinance regulates not only the conditions and procedures for the “Establishment of travel agencies” (whether with foreign investment or not), but also the “Operation of travel agencies”, the “Supervision and control of travel agencies” and “Penalties”. According to China’s commitments within the WTO, after 1 January 2003, foreign travel agencies will be allowed to control (by holding over 51% of shares) of joint-venture travel agencies. After 31 December 2005, solely foreign-owned travel agencies can operate in China. In conclusion, the recent changes to tourism-related regulations will help consolidate the already flourishing Chinese tourism sector and pave the way for overseas investors to enter the market. China’s entry into the WTO has exerted — and will continue to exert — a positive impact on the tourism sector, while creating new challenges for domestic travel agencies. Some of those challenges — and opportunities — will arise from China having won the right to host the 15th General Assembly of the World Tourism in 2003 and the Olympic Games in 2008. According to CNTA projections, in 2020, China should attract about 145 million visitors, of which 33.5 million will be foreigners, generating US$75 billion of foreign income. And, based on CNTA projections, the World Tourism Organisation predicts that by 2020, China will become one of the world’s leading tourism destinations, probably overtaking traditional destinations such as France, USA and Spain. Robert Bijloos and Shenghui Lu are from LPA, Lawyers. For further information, contact: Lefèvre Pelletier & Associés, Avocats, Paris — Hong Kong, www.lpalaw.com |
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