June 18, 2019
When talking about the rise of China, its economic growth is usually front and center. But underpinning this growth is a myriad of factors that shape the country’s industries.
Here we look at what’s really driving China’s travel industry – both domestic and outbound – and highlight the rapid changes that have taken place.
These could have an impact for years to come.
Advancements in infrastructure
China’s transport infrastructure has gradually improved alongside the country’s overall development, and “express transport” (expressways and high-speed railways) is an area that has seen faster growth, facilitating travel around the country.
“Length of high-speed railways grew at a 46% CAGR over the past 10 years.”
According to the National Bureau of Statistics, the length of expressways and high-speed railways increased at CAGRs of 9.7% and 46% over the past 10 years. High-speed railways (China’s very first was launched in 2008) account for roughly 22% of the total length of railways and 60% of railway passenger traffic.
Some perspective – taking into account the “Hu Line”
If we only consider China’s level of infrastructure development east of the “Hu Line” – an imaginary line named after its creator which cuts across the country diagonally to divide it into two roughly equal areas – China’s transport infrastructure density is comparable to that of developed countries.
Figure 1: Only 4% of the population lives in the 64% of the country’s land area west of the Hu Line, also known as the Heihe-Tengchong Line 
Source: CICC Research
“96% of China’s population lives east of the Hu Line”
According to the National Bureau of Statistics, China has 4.77mn km of roads, placing it third in the world – behind the US (6.65mn km) and India (5.6mn km). However, its road network density in the eastern part of the country has reached 11,000km/10,000km2, surpassing the US level of 7,200km/10,000km2.
As for China’s railways, its network density has reached 132km/10,000km2 (in eastern China: 266km/10,000km2) – for comparison, the US’s level is at 160km/10,000km2. China plans to build even more high-speed railways and this could further facilitate domestic travel and provide a boost to the overall travel industry.
Figure 2: International comparison of road (left) and railway (right) network density in 2018 
Source: Wind Info, CICC Research
Favorable demographics
Having an aging population and a declining number of children per family has contributed to the growth of the travel industry in other countries. Those retired at 65 have more leisure time, and the lower number of children per family means a lower cost burden for the younger generation of parents, both of which bode well for the travel industry.
For example in Japan, the domestic travel market grew at an annual rate of about 6% over 1980–2000 and overseas travel grew at a rate of 8%. Data from the US shows a similar story.
China also has an aging population and has seen the number of children per family decline. Over the past 50 years, the country’s proportion of children under the age of 14 has fallen from 41% to 17%, while the proportion of those over the age of 65 has grown from 4% to 12%. The Office of the China National Committee on Aging predicts that these two trends may continue for another 20 years, based on assumptions on birth and mortality rates.
Figure 3: China’s aging population and its declining number of children per family 
Source: Wind Info, CICC Research
Figure 4: China’s two baby booms 
Source: Wind Info, CICC Research
Rising urbanization rate
Urbanization also appears to have an impact on long-distance travel. Over the past 20 years, the number of long-distance trips by urban residents increased at a CAGR of 13%, in contrast to a CAGR of only 6% for rural residents. Urban residents made an average of 4.5 long-distance trips in 2017, versus only 2.3 trips for rural residents.
For comparison, Japan has an urbanization rate of 90%, and people there made an average of 5.3 long-distance trips in 2017.
“China’s urbanization rate has jumped from 26% in 1990 to 60%”
While China’s urbanization rate has jumped from 26% in 1990 to 60%, the rate is still well below the US’s 80% and Japan’s 90%. A rise in its urbanization rate could help support China’s long-distance travel market.
Figure 5: Number of long-distance trips per capita per year in China’s urban and rural areas, and Japan 
Source: Wind Info, CICC Research
Figure 6: Spending per capita per long-distance domestic trip in China’s urban and rural areas, and Japan 
Source: Wind Info, CICC Research
Relaxation of visa policies, growing number of passport holders
On the back of China’s economic development, a number of countries such as Canada, Japan, Thailand, the UK and Australia have relaxed their visa policies for Chinese citizens since 2017. Specific measures include simplifying the visa application process, shortening the processing time, raising the approval rate, and lengthening the visa validity period.
At the same time, the number of countries that allow Chinese citizens to visit without a visa or can apply for one on arrival has grown. The number jumped from 43 in 2010 to 72 in 2019.
It has also become easier to apply for visas in China’s tier-2 cities. While in the past many countries had consulates only in tier-1 cities, the UK, Canada, France, Switzerland, Italy and Germany, among others, have set up new visa application points in tier-2 cities such as Shenyang, Xi’an, Jinan, Wuhan and Fuzhou to attract Chinese tourists.
“Only 3% of the population had a passport in 2012 – this has rocketed to 9.3% by end-2017”
Another factor that could make it easier for Chinese citizens to travel abroad is they no longer need to submit their household registers when applying for exit-entry documents. The application process has also been simplified: photo collection, fingerprint collection, application submission, face-to-face verification and document payment can be done at the same time and at the same place.
Not surprisingly, the number of passport holders has jumped from only 38mn in 2012 (about 3% of the total population) to 130mn at the end of 2017 (9.3% of the total population), rising at an annual rate of over 20% in recent years.
Still, the percentage of passport holders in China is still low compared to developed countries (76% in the UK, 42% in the US, and 25% in Japan), which indicates there could be further room to grow.
Figure 7: Percentage of passport holders in China and developed countries in 2017 
Source: Zhiyan Consulting, CICC Research
New opportunities
China’s travel market is changing – and changing fast.
This, along with the growth in total spending on long-distance travel (and related sectors) by Chinese households could create structural opportunities in many areas for years to come.
For more details, please see our report Marvelous travel: Growing market backed by improving living standards published in June 2019.
