The Chinese government has instituted a new annual limit on the amount of money that can be withdrawn from personal Chinese bank accounts overseas, set at $15,000 (100,000 yuan). The move is an attempt to curb money laundering, terrorism financing, and tax evasion. In the past, anti-corruption policies have caused substantial damage to both the luxury industry and the Chinese outbound tourism industry by driving down spending. However, that doesn’t mean that this new regulation is bad for stakeholders, in fact, there are substantial, potential benefits, particularly in terms of helping stakeholders better assess the total spending of Chinese tourists and the relative health and growth of China as a source market.
Overseas withdrawals from Chinese banks are now limited annually to $15,000
This newest limit is of course not the only such anti-corruption regulation to come out in 2017. In June, the Chinese State Administration of Foreign Exchange (SAFE) issued a regulation requiring banks to report overseas transactions over 1000 yuan ($153 as of writing this) overseas. The intent of these restrictions is of course to better monitor the flow of money out of the Chinese banking system. No small feat given the traditional preference among Chinese consumers for cash transactions.
This is one reason that the Chinese government has been so receptive to the popularity of mobile payment platforms like Alipay and WeChat Pay. They’re simply easier to track.
Undoubtedly, these kinds of regulations will drive down the spending of Chinese tourists. The silver lining, of course, is the clarity these new rules provide. Currently, it’s hard to ignore the impact that illicit money has on the tourism markets around the world. In 2017, an economist at the Federal Reserve argued that a substantial amount of money classified as “tourism spending” was in fact asset investment. Much of which is facilitated through cover-up purchases of high-value items like jewelry. This “tourist spending” was, in fact, the purchase of insurance, real estate, and annuities, among other things.
Even if Chinese tourist spending is driven down, the regulations provide much needed clarity
In short, the figure of $33 billion in Chinese tourist spending in the United States may be substantially lower in reality. Other markets like Britain have similar issues. For example, between 2012 and 2013 the number of Chinese visitors to the UK rose from 178,000 to 200,000, an increase of 12 percent. However total spending rose from 300 million pounds to 500 million pounds ($495 million to $825 million in 2013 dollars) or an increase of about 66 percent. Such a significant spike in tourism spending compared to arrivals implies that the money wasn’t all pure tourist spending.
Tourist spending figures in many destinations are likely highly inaccurate due to “grey money”
By reducing the amount of grey tourist spending in any market, tourism stakeholders can have a better idea of the potential for growth and revenue, opposed to numbers influenced by spending that most tourism stakeholders would never be able to access. Cutting down on this grey spending can only result in better-informed stakeholders and a great ability to assess risk and reward, and by extension make smarter business decisions.