ENTER THE DRAGON

China’s business travel market is growing fast – whatever the impact Trump’s trade tariffs may have

Corporate travel is increasingly big business in China

How will US president Donald Trump’s tariffs on Chinese products affect the Chinese business travel market? According to economic research consultancy TS Lombard, the effect of greater global protectionism is likely to be that the world reconfigures into regional trading blocs, with an Asian bloc centred on China.

Trump’s hopes for the reshoring of manufacturing to the US are unlikely to be realised, TS Lombard says. China has the prerequisites to make an Asian-based trading bloc work without the US: a large domestic market, political support for open markets and manufacturing expertise. Could that in turn mean the regionalisation of Chinese business travel as doors in the US close?

GROWTH INDUSTRY

There’s a lot riding on predicting where the Chinese business traveller will be going. The Global Business Travel Association (GBTA) argued in August last year that despite the slowdown in China’s economy, the Chinese business travel market would be the world’s fifth fastest-growing market over the next five years, generating an additional US$129 billion in annual business travel spend by 2022. The Chinese market was predicted to outpace that of the US, which was forecast to grow slightly below the global average over the next five years.

Wouter Geerts, a travel consultant at Euromonitor in London, sees the potential for increased regionalisation of Asian travel. He argues that depreciation of the renminbi, a consequence of the trade dispute, will result in an increase in travel demand from neighbouring countries. About 80 per cent of all international trips in Asia-Pacific stem from within the region, and “it is likely that this will increase if relations with the US worsen”, he says.

According to Jeff Ruffolo, writer of China’s 2022 Olympic bid and senior expert in international relations with China Southern Power Grid, US tariffs won’t be enough to disrupt the existing dynamics of Chinese business travel. If anything, he argues, Chinese business trips to the US are likely to increase as salespeople, less able to compete on price, will hit the road more often. “The Chinese are not going to sit back and wait for the impact of tariffs,” he says. “The owners realise they have to do a much better job in sales – and they will.”

Ruffolo is bullish about the Chinese economy as a whole and is unimpressed by TS Lombard’s prediction of new trading blocs. This, he says, reflects “a Western mindset… the mindset of someone who has not been here and who does not understand what is going on”.

Yet a Western perspective is not necessarily inaccurate when hard data is available. The GBTA cautions that trade wars are the biggest single threat to the global business travel market, and calculates that 60 per cent of the variability of global business travel spend is accounted for by world trade volumes. The 2018 China Business Travel Survey, produced in October by American Express Global Business Travel and China International Travel Service (CITS), found that making business travel cost savings had become the overriding priority of Chinese businesses, cited by 62 per cent of companies. Costs displaced safety and security, which was the top priority in 2017.

The survey also found that

45 per cent of Chinese business travel managers had limited knowledge about how to implement travel programmes. Chinese managers lack information on whether and when high-speed rail is faster than flying, international visas, safety and security, and how to achieve cost savings – that suggests a big opportunity in a business travel market in which a clear leader has yet to emerge.

Taking that opportunity will mean understanding the diversity of the destinations for Chinese business travel. Sienna Parulis-Cook, communications manager at Dragon Trail Interactive, a digital marketing agency in London that helps overseas destinations to attract Chinese visitors, believes that the US-China trade war has already affected Chinese travel to the US. She points to Forward Keys July data showing a 9 per cent year-onyear decrease in Chinese bookings to the US, and the US falling from fifth to tenth place as a destination for October holiday tourism from China. Group tourism has been much harder hit than individual leisure travellers, who are much less sensitive to political issues, she points out.

Parulis-Cook expects that Chinese companies will reduce incentive travel to the US and focus on other destinations instead. Chinese incentive groups can be very large – the annual incentive trip for Nu Skin China sent 16,000 staff to the UAE in 2014. “With shaky business and political relationships, Chinese companies would naturally look outside the US when organising such trips for the future,” she says, pointing to the obstacles faced by companies such as Huawei in entering US markets.

If it seems that Chinese firms will find it harder to do business in the US, business travel will appear as a “dangerous investment”, she argues. “There are many other markets outside of the US that could be cultivated instead – for example, India or Russia, where sales of Chinese smartphones are booming.”

BROADENING HORIZONS

Business travel could even prove to be a retaliatory weapon for the Chinese, argues David Armstrong, a China specialist and emeritus professor at the University of Exeter. China “has very clearly indicated that this could be a weapon in the trade war”, he says. “For example, in July the Global Times said that Chinese people were increasingly ‘reluctant’ to visit the US.” If trade between the two countries falls as a result of the tariffs, Armstrong argues, this would “significantly and inevitably affect business travel both ways”.

Trump is especially sensitive to the notion that China has been stealing US technology, and high-tech sectors might be particularly affected, Armstrong says. There is no doubt in his mind that Chinese business travellers will broaden their horizons. China’s grand plan to connect Asia, Africa and Europe, “The Belt and Road” initiative announced in 2013, combines overland corridors and maritime shipping lanes. The project is expected to cost more than £760 billion and entails Chinese

construction projects across the three continents. If it works, Armstrong says, the plan will “lead to a major increase in business travel to numerous other, more welcoming, countries”. Parulis-Cook believes those countries will be found in South East Asia, Eastern Europe, the Middle East and Oceania, as well as in India and Russia.

Parulis-Cook says that while business travel to the US may well decline, there’s no prospect of it t becoming more regionalised. But ut how long will the trade war continue? ntinue? Hawkish Republican stances on n China have been warmly received ed across the US political spectrum. m. Armstrong sees no prospect in the short term of any significant t climbdown from Beijing, meaning ing the trade war will continue. But t further forward, he does not believe lieve that the trade war can be indefinitely nitely sustained, regardless of Trump’s s fate.

“The damage it will inflict on both sides (and the rest of the world) will become increasingly apparent, putting pressure on both sides to reach an agreement,” he argues. If Trump wins a second term, “he would almost certainly have to work out ways of restoring the world business markets to where they were in 2018”. That looks an impossible task given the range of alternative business travel destinations that China is already embracing.

If anything, Chinese business trips to the US are likely to increase as salespeople, less able to compete on price, will hit the road more often