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SCMP Reporter

China Travel International Investment (CTII) looks set to drum up investor interest by expanding in the mainland and strengthening corporate regulatory controls after being 'sidelined' by analysts since the red-chip bubble burst in late 1997.

The company wants to acquire or merge with mainland travel agencies as part of efforts to re-focus on its core business after spreading itself too thinly during a boom-time bout of diversification.

It said the new management had also taken measures to prevent malpractices after its former managing director Zhu Yuening was recalled to Beijing to assist in an investigation into 'questionable deals' by CTII parent China Travel Service (Holdings) Hong Kong (CTSHK).

Mr Zhu was replaced as CTSHK chairman by Che Shujian, a former State Council-commissioned investigator in May last year.

CTII managing director Shen Zhuying said his company would seize new mainland opportunities.

Mr Shen said the company wanted to tap the growing markets for both inbound and outbound travel in China, Hong Kong, Macau and foreign countries by acquiring or merging with travel agencies in the mainland and Hong Kong, including those owned by the China Travel Service Group.

'We will also leverage on the recently acquired China Travel Service (Hong Kong) and strengthen CTII's business relations with its overseas sister companies,' Mr Shen said.

CTII bought the Hong Kong-based travel agency, a Macau hotel and a 62 per cent stake in information-technology arm China Travel Net for HK$1.91 billion from CTSHK last month.

Mr Shen said CTII planned to acquire and merge with mainland travel agencies in the more developed markets of Guangdong province and the cities of Beijing, Shanghai and Xian.

CTII would try to develop entertainment programmes, transport system and hotel businesses with the domestic travel agencies.

'Last year, about 80 million foreign tourists, including those from Hong Kong and Taiwan, visited the mainland, up 16 per cent over the year 1999,' said Mr Shen.

The foreign tourists had brought US$15.6 billion in foreign exchange income into the country.

On the reverse, about 10 million mainland tourists travelled overseas, up 13 per cent over the previous year.

The travel industry accounted for 5 per cent of China's gross domestic product last year and the figure is projected to reach 8 per cent by 2010.

The trends are expected to gain momentum: China was rated as the fifth most interesting tourist spot in a World Tourism Organisation survey on tourists worldwide, said Mr Shen.

The state policy to spur domestic consumption by extending the holiday periods for the Spring Festival, the National Day and the Labour Day has also benefited the sector.

Another contributing factor is that an increasing number of mainland Chinese are becoming better off and can afford overseas travels.

Overseas travel has become so popular that China National Tourism Administration (CNTA) felt the need to strengthen its regulation on the domestic travel agencies managing touring-abroad services. Last week, the administration issued more stipulations that prohibited tours to the not-yet open destination countries. CNTA will revoke the licences of the agencies which do not obey the rules.

Mr Shen said the domestic travel agencies wanted to merge or co-operate with foreign investors because they needed to survive the intensifying foreign competition after China's expected accession to the World Trade Organisation.

'Partnership with foreign industry players can help the domestic travel agencies raise their standards and enhance their competitiveness.'

The country's relatively young and underdeveloped travel industry still has some way to go to cope with the rapidly growing domestic demand.

The overall industry is plagued by problems such as limited capital scale, insufficient infrastructure, substandard management and outdated marketing strategy.

As a case in point, domestic tourists found it hard to book hotel rooms and transport means during the long holidays.

The mainland started seriously developing the sector about two decades ago by targeting inbound foreign tourists in a bid to earn foreign exchanges.

It was only in the 1990s that the industry began to shift its focus to domestic tourists travelling nationwide as their consumption power grew considerably.



China Travel maps out revival plan