Meanwhile, as China makes giant strides in becoming a much sought after holiday destination, it is boosting its efforts to cater to increasingly wealthy domestic travellers. Official estimates put the number of annual domestic travellers at two billion to 2.5 billion by 2010, creating a market of US$125 billion.

The service sector is becoming an increasing important part of the economy, according to Cheng Xiusheng, an economist at the Development Research Centre, a top think-tank under the State Council.

'Tourism is a major part of that sector,' he says.

The steep rise in domestic incomes is making travel much more accessible to people who once would have considered tourism a luxury they could do without.

'As incomes rise, people may not be able to afford a house or a car, but travel is within reach,' Mr Cheng says.

'This is making a large contribution to economic growth.'

Meanwhile, the huge growth in tourism - both foreign and local - is straining the nation's transport sector.

The mainland has cancelled late-night flights and some charter services in an effort to improve safety after two fatal air crashes.

'The main problem is transport,' says Cui Yunping of China International Travel Service in Xian, home of the famed terracotta warriors and one of the country's most popular tourist attractions.

'Airlines are having problems coping, and sometimes there just aren't enough rail tickets,' says Mr Cui.

The airlines are scrambling to buy new aircraft, bringing a smile to the face of executives at Boeing and Airbus Industrie.

But it will take time to train more pilots and put more airport capacity in place.

China has been spending heavily on basic infrastructure, partly to boost economic growth, and that is expected to continue. It spent 1.02 trillion yuan (about HK$966 billion) on basic infrastructure in the 1996-2000 period, and spending in the current five-year plan is expected to at least match that level.

While that figure includes spending on other big-ticket items, it also includes airports, roads and railways.

Meanwhile, the hotel sector is expanding rapidly to meet the surge in demand.

China had about 8,100 hotels rated as suitable for foreign tourists at the end of last year, after 10,000 had applied for approval, according to the China Tourist Hotels Association.

Most of the investment in the hotel sector is from big state companies and foreign partners, but there are some exceptions.

Private firms such as the Hope Group in Sichuan and the Kaiyuan Group in Zhejiang are among those making inroads in the high-end hotel business.

'There is a trend for more private sector investment, but this is not yet the mainstream,' says an official of the hotels association. Most of the investment is in the two- to three-star market segment.

While there are plenty of four- and five-star hotels opening up, the concentration on the middle market is not likely to change any time soon, industry association officials say.

Meanwhile, industry officials are looking to new tourist destinations as well as eco-tours and adventure travel to tap demand from different markets. The restoration of old towns, such as Wuzhen along the canals of eastern China, has been a considerable success.

'We really had to take a lot of care that we did not make it too commercial,' says a Zhejiang provincial official familiar with the project. 'We had to make sure we didn't spoil it, for some places have been spoiled as an attraction in the effort to make quick money.'

In recent years, tourism has been a handy way to stimulate consumption and boost economic growth. Beijing has used what it calls 'holiday economics', giving people more time off from work to go out and spend.

Mainlanders now have three long vacations a year - Lunar New Year, May Day and the October 1 National Day holiday. The recent May Day holiday saw about 33.1 billion yuan spent, up 14.9 per cent from the same week-long holiday last year.

But this formula has meant huge crowds at airports and train and bus stations, despite extra holiday service. Choked roadways and over-booked hotels are discouraging some people from heading out of town.

'It would be better if we scattered the vacations,' says Chen Jisheng of Chunqiu Travel in Shanghai. 'We should give people compensation leave at other times of the year.'

And if that policy does not change, the cautious overseas tourists might want to avoid visiting China when the whole country is on the move.