Prior to the pandemic, Visa had forecast global travel to rise over 10 years by 66 million new households traveling internationally to 282 million by 2025, with one in three of those new households coming from China.⁵ Given China’s zero-COVID policy today and associated frequent lockdowns, that prediction now appears unlikely.
Even when China lifts its COVID policies, whether it remains one of the main drivers of long-term growth in global travel and tourism is increasingly uncertain. A rapidly aging population combined with a downshift in economic growth and downward pressure on asset prices could cause the next decade in outbound travel from China to be less robust than many now expect. If the experience of Japan in the 1990s is any indication, China’s outbound travel may possibly have peaked in 2019.
China and Japan have both experienced rapid population aging, with a key difference being that Japan faced this challenge earlier. In 1985, the median age in Japan rose above 35 years, while China crossed a similar threshold in 2010. Aging alone will not necessarily derail rapid growth in outbound travel as both countries in the decade passing this threshold saw similar rates of growth in international departures.
Aging combined with slower economic growth can lead to stagnation in the growth of outbound tourism, as Japan experienced soon after in the 1990s. This was its lost decade when, after decades of rapid industrialization, growth slowed and real estate prices corrected. The old age dependency ratio steadily rose to the point that there are now only two people of working age per person over the age of 65, based on statistics from the World Bank.
In terms of old age dependency, China is converging with Japan at a faster pace, with five workers per potentially retired person in China today, due in large part to the legacy of the one child policy. Many economists now believe that China’s best years in terms of growth are behind it. The current fall in real estate prices—a significant store of household wealth in China—places additional stress on household finances and tightens Chinese travelers’ budgets for overseas trips.
As Japan’s leisure surveys show, aging plays a role in reducing outbound travel as older households on fixed incomes do not travel as much as those in their prime earning years. The downward shift in international travel participation between 1996 and 2011 also shows that a structural downshift in growth can also lead to much weaker outbound travel demand. Whether China can escape this challenge depends greatly on the country’s long-term growth trajectory.