23 Jan 2023
The recovery the world needs
Richard Yetsenga |
China will be reopening as the world economy slows and its signs of recovery provide further insurance against a global recession.
10 Feb 2023
China reopens; Australia wins
The Chinese government has officially ended its highly restrictive zero-COVID policy and people are now moving about. China’s reopening will boost Australia’s service exports, lifting Australia’s gross domestic product (GDP) growth by 0.4 percentage points over the next two years.
Meanwhile, we expect at least 50,000 students from China to arrive in Australia following the Chinese government’s decision to ban students from studying online at foreign universities. We’re less optimistic about a full recovery of Chinese visitors to Australia in 2023, particularly while travel is so expensive.
“China’s reopening will boost Australia’s service exports, lifting Australia’s economic growth by 0.4 percentage points over the next two years.”
And there’s less upside for Australia’s goods exports to China but the pick-up in industrial activity will support LNG exports. We expect China’s property sector woes to continue which will limit any upside for iron ore.
There has also been talk of the Chinese government unwinding some of its trade measures against Australian exports but the impact of any reversal is likely to be modest – and mostly price-driven.
Key impacts for Australia ... 0.4ppt boost to Australia’s GDP growth over the next two years. >50k international students from China to return to Australia for Semester 1.
The return of Chinese students and travelers will lift GDP growth by 0.4 percentage points over the next two years
Travel service exports to China, % Australian GDP
There’s been a robust recovery in domestic tourism and consumption over the Lunar New Year holiday.
Migration during the Lunar New Year
However, consumption in China has not fully recovered. Total spending during the festive period was only 70 per cent of pre-COVID levels. We expect the high jobless rate, slow growth in disposable income and the sluggish property market to weigh on China’s consumption in the near term.
Domestic tourism revenue in China
For Australia, the return of Chinese students and travellers will lift GDP growth by 0.4 percentage points over the next two years. In 2021-22, Australia’s personal travel exports to China – which measure education and tourism related exports – were down 74 per cent compared with before the pandemic. The return of Chinese students to Australia matters to the bottom line as these students need to find a place to live, buy food and pay bills. These ‘living costs’ account for 57 per cent of education exports. Tuition fees make up the rest.
Travel service exports to China, % Australian GDP
However, Australia’s missing 1.3 million Chinese visitors are unlikely to all return in 2023. Before the pandemic, over 1.4 million Chinese visitors came to Australia each year, making up 16 per cent of all short-term arrivals. They currently make up 2 per cent.
While we expect an accelerated return of Chinese visitors, it’s likely to be a few years before numbers fully recover. The cost of travel is prohibitively high for some and many are experiencing passport and visa delays which could dampen their travel appetite.
The return of Chinese visitors matters as they spend almost five times more than the average visitor per trip.
Chinese short-term arrivals were down 91% in Nov
The Chinese government’s decision to ban students from studying online at overseas universities should lead to an influx of around 50,000 Chinese students to Australia. There are currently 63,000 Chinese student visa holders located outside Australia. And the number of actual students could be higher, as some students enrolled for 2023 still don’t have a visa. However, not all students will be able to organise their travel and living arrangements in time for Semester 1 this year.
Chinese student visa holders in and outside Australia
For the full report, click here
Madeline Dunk is Economist, Adelaide Timbrell is Economist, Felicity Emmett is Senior Economist, Arindam Chakraborty is Junior Economist, Daniel Hynes is Senior Commodities Strategist, Catherine Birch is Senior Economist and
Raymond Yeung is Chief Economist, Greater China at ANZ, Institutional
The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.
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