China ‘tourist’ spending concealing flow of investment overseas, says Fed report
Report suggests that some Chinese are getting round curbs on moving cash out of the country by saying spending was on ‘tourism’
Tales of Chinese tourist largesse providing a big boost to destination economies are legend. They may also be incorrect, with China’s current account surpluses understated as a result.
Anna Wong, a senior economist with the US Federal Reserve, reckons the money spent overseas by Chinese tourists – some US$215 billion last year, according to one industry estimate – is not all it is cracked up to be.
Wong said in a draft paper for the Fed’s governors that a large amount of the money designated as having come from Chinese tourists globally should actually count as investment in assets.
“Financial outflows concealed as travel imports are large and significant, growing to around one per cent of China’s GDP in 2015 and 2016, and account for a quarter of recorded net private financial outflows,” she wrote.
This would mean that China’s current account surpluses over the past few years are actually larger than reported and possibly as big as before the financial crisis.
China’s capital controls make it difficult for wealthier Chinese to invest abroad. But the implication of Wong’s findings is that there are a plethora of ways for the country’s “tourists” to buy property and other assets overseas.