As Chinese consumers’ belts stay tightened, Beijing banks on foreign tourists splurging

BEIJING – Seven foreign tourists leaving Shanghai recently ended up paying excess baggage fees for 40 boxes of Chinese goods – a shopping haul that a top Chinese official said “was still worthwhile”, thanks to China’s tax refund policies for departing visitors.

The anecdote, shared by Culture and Tourism Minister Sun Yeli at a press conference on the sidelines of the Two Sessions on March 7, illustrates the kind of spending the Chinese authorities are increasingly hoping to see from overseas visitors.

As domestic consumers remain cautious about spending, Beijing is looking to foreign visitors to open their wallets to help inject fresh demand and revive consumption in the world’s second-largest economy.

But economists caution that even such eye-catching shopping sprees are unlikely to solve China’s deeper consumption problems.

Ms Betty Wang, head of North-east Asia research at Oxford Economics, told The Straits Times that inbound tourism is likely to serve only as a “supplementary boost” that would help at the margins – especially for the tourism, retail, transport and hospitality sectors – rather than being a game changer for the overall economy.

“The bigger constraint remains weak household demand, elevated precautionary savings, and an uncertain outlook for jobs and income,” she said.

Chinese officials have begun promoting what they call the “Shopping in China” initiative, or zhongguo gou. The term was first mentioned in April 2025 at a consumer products expo in Hainan, but has since entered the government lexicon, appearing in the government work report at the current Two Sessions, or Lianghui, for the first time.

To attract more foreign tourists to spend in China, measures such as streamlined tax refunds and expanded visa-free travel schemes have already been rolled out.

More could be in the pipeline, as Beijing pledged in the government work report to “improve the consumption environment for inbound tourists to make China a favoured shopping destination”.

Mr Sun, who spoke at a press conference addressing livelihood issues on the sidelines of the Two Sessions, again highlighted the tax refund initiative. The annual Two Sessions parliamentary meetings in Beijing are where thousands of delegates gather to discuss national policies.

He said foreign visitors’ shopping lists in China are expanding rapidly.

“From smartphones and drones to virtual-reality headsets and cultural and creative products, these have become what foreign visitors see as distinctive Chinese goods,” he said. Tea, ceramics and silk are among the traditional Chinese souvenirs that foreign visitors once tended to buy.

There are signs on social media that China is increasingly being viewed as a shopping destination. On TikTok, content creators have begun sharing tips on how to shop in China, from buying cheap luggage locally to fit their purchases to ordering items from Chinese e-commerce platform Taobao and having them sent to their hotel, ready for pickup when they check in.

Mr Sun also pointed to a recent “becoming Chinese” trend on social media, where foreigners share videos of themselves trying everyday Chinese habits, such as drinking hot water for health or brewing herbal teas with apples and goji berries, as a reflection of foreign visitors’ attraction to Chinese culture.

The push for more foreign spending comes as inbound tourism has started to recover after years of Covid-19 pandemic disruptions.

In 2025, China recorded more than 150 million inbound trips, up 17 per cent from 2024, according to official data. Spending by inbound tourists exceeded US$130 billion (S$165 billion), an increase of nearly 40 per cent from 2024, while more than 30 million foreign visitors entered China visa-free.

As its unilateral visa-free policies have expanded to 50 countries and its transit visa-free policies to 55 countries, Mr Sun noted that “a spontaneous trip to China is a very realistic possibility”.

The authorities have also sought to make it easier for foreign visitors to spend while in China, allowing foreign bank cards to be linked to local payment platforms such as WeChat Pay and Alipay for more convenient mobile payments.

In 2025, inbound visitors spent more than 80 billion yuan (S$14.7 billion) through mobile payments, said Mr Sun, adding that the technology has also become a way for travellers to experience everyday life in the country.

Economists have long said that China needs to expand its services consumption to support growth, especially as income levels rise and as domestic investment weakens amid persistent external uncertainty.

Oxford Economics’ Ms Wang said the push to attract more foreign visitors is one way to generate demand in the services sector, which is often labour-intensive, helping to create jobs relatively quickly.

As China transitions into a more services-led economy, spending from foreign visitors can help deepen that shift and improve the global competitiveness of the country’s tourism and consumer services ecosystem, she said.

“It’s also about signalling that China remains willing to open up and engage with the rest of the world, which could in turn create a more positive backdrop for regional cooperation, especially considering the fast-moving global landscape,” said Ms Wang.

Besides attracting foreign visitors, some Chinese cities are also experimenting with new ways to stimulate spending. One area of focus has been the “debut economy”, where brands release new products or services for the first time in China to generate excitement, along with night-time spending, digital consumption and deeper integration between culture, tourism and commerce.

Mr Quan Heng, deputy director of the Shanghai municipal publicity department, said cities such as Shanghai had previously focused more on retail shopping, but are now shifting towards service-based, experiential and scenario-driven consumption.

This includes concerts or large-scale events that attract crowds and generate spending across sectors such as restaurants, hotels, entertainment and transport.

In 2025, Shanghai alone hosted more than 3,700 large-scale events that attracted 44.14 million attendees, he said.

“As you know, Shanghai has a permanent population of 25 million people, so the footfall behind these events is very large. The results of our efforts have been very remarkable,” he said.

Shanghai is often included in the itineraries of many foreign visitors travelling to China for the first time, reflecting its role as one of the country’s key consumption and tourism hubs.

China’s domestic consumption has been sluggish in recent years not because households lack money to spend, but because many Chinese traditionally save a large share of their income in what economists call “precautionary savings”, to guard against future uncertainties.

The country’s household consumption accounts for less than 40 per cent of gross domestic product (GDP), far below levels seen in countries such as the US, where it stands at about 68 per cent, and Japan, at roughly 55 per cent.

Dr Tian Xuan, associate dean and chair professor of finance at Tsinghua University’s PBC School of Finance, told ST on the sidelines of the Two Sessions that Chinese households tend to prioritise saving, and may feel the need to set aside more money if livelihood concerns such as pensions, healthcare and education costs are not fully addressed.

Beijing pledged to expand domestic demand and achieve a “notable increase” in household consumption in its newly unveiled 15th Five-Year Plan, which sets out government priorities over the next half-decade, although it stopped short of a concrete target.

Dr Tian said raising China’s household consumption share to around 45 per cent of GDP over the next five years would significantly boost domestic demand.

“On average, that would mean an increase of about 1 percentage point per year. Some years may be slower and some faster, but overall, this would play a very important role in strengthening the role of consumption as a growth driver,” he said.