British shops pray the streets will still be paved with yuan

Around 6 million Chinese tourists are believed to be heading overseas next week alone as the nation holidays en masse for the lunar new year.

With the Spring Festival holiday comes the world’s largest annual migration of people – and those travelling abroad will be taking their wallets with them: the 214,000 Chinese who visited the UK last year spent on average £2,688 a head, with the designer outlets of Bicester Village ranking as the second most popular destination on their tours after Buckingham Palace.

Chinese outbound tourism has been growing by nearly 20 per cent annually for the past decade. Around 109 million of the country’s population travelled aboard last year, spending, according to the UN’s World Tourism Organization (UNWTO), $165trn (£114trn) in total – $54trn more than the next biggest spenders, the Americans.

But with China’s economy growing at it slowest rate in a quarter of a century, and Shanghai’s stock market crash in August wiping out hundreds of billions of dollars of savings in just four days, can this continue? And what does it mean for the rest of the world’s retailers, especially in the luxury sector, if time is called on the double-digit growth in Chinese tourist expenditure over the past 12 years?

The British fashion house Burberry gets about 40 per cent of its global revenues from shoppers in Hong Kong and China, and its shares plunged to a three-year low last October after it warned that underlying sales in Hong Kong had fallen by 20 per cent in the quarter to 30 September.

A survey by the brokerage CLSA last month found that more than 60 per cent of Chinese respondents plan to make fewer overseas trips as result of the economic slowdown, prompting the broker’s analysts to forecast outbound tourist growth would slow to 9 per cent over the next five years. Global Blue, the tax-free shopping network, also notes that growth in spending by Chinese shoppers in the UK slowed to just 1 per cent year-on-year in 2015.

But Global Blue’s figures show individuals are still spending £742 per transaction. And John Kester, director of tourist market trends at the UNWTO, argues that the Chinese economic slowdown needs to be put into perspective. Huge as that 6 million figure for outbound tourists is, it’s just a tiny proportion of the 2.9 billion trips that Chinese people are believed to be making over the spring holiday season. “We see a country, with a 1.4 billion population of which there are several hundreds of millions with the means to travel internationally,” Mr Kester said last month.

Neil Saunders, an analyst at the retail consultancy Conlumino, explained that overseas tourism is still a new phenomenon for the Chinese. “The trend of travelling abroad really started in the 1980s when the country started to open up,” he said. “It has grown significantly since then, especially so in the past 10 years thanks to the rise of the middle-class, who have the means to travel, and also because of the increasing list of destinations which are approved by the Chinese authorities.”

One unfavourable factor could be the sensitivity of Chinese holidaymakers to exchange rates. Burberry revealed last month that in the three months to 31 December 2015 its UK market became more challenging with a slowdown in travelling customers from China. But its sales jumped in Italy and Spain, as the relatively high value of the pound against the euro at times encouraged shoppers to splurge on the Continent rather than here.

Philip Guarino at China Luxury Advisors said exchange rates are key. “Most recent figures see very strong growth in Japan and the eurozone due to a weak euro, and some softening in the US due to a stronger dollar. In the UK a more flexible visa regime and a weaker pound [this year] are driving strong growth in both Chinese visitation and spending.”

Hong Kong, long a tax-free shopping mecca for Chinese mainlanders, has lost market share in recent years to rivals such as Japan and South Korea. A strong Hong Kong dollar and high overheads for retailers mean a Louis Vuitton designer bag is now 20 per cent cheaper in Japan,

The luxury designer Prada and Swiss watchmakers have also reported sales slowing in the territory as shoppers head elsewhere.

So what can countries and retailers do? The UNWTO’s Mr Kester explained that airline capacity and visa availability are the main limits on growth. But the UK tourism agency VisitBritain pointed out that a number of measures are in place to keep the UK on the Chinese holiday map. As well as last month’s introduction in Britain of a new two-year visitor visa for Chinese nationals – enabling holders to make multiple trips here –VisitBritain noted that the first direct airline route from Beijing to Manchester will become operational in June.

VisitBritain is also involved in a £1.3m social media campaign to encourage Chinese visitors to visit British soil.

China Luxury Advisors’ Mr Guarino said there are other factors that impress the Chinese: “Authenticity, product availability, service and experience drive Chinese consumers to purchase over 80 per cent of luxury goods abroad.”

Global Blue also urges British brands to focus on campaigns executed in China that talk about their heritage and the location of their stores.

VisitBritain director Patricia Yates remains convinced that the UK will remain popular despite wider economic concerns.

She told The Independent: “We are looking forward to another boost in visits from this rapidly growing market, the world’s largest outbound market.”

And despite the slowdown, CLSA says it is sticking with its longstanding forecast of 200 million Chinese overseas trips by 2020.

Hope remains high that the international shopper from the People’s Republic will not be put off by anything as inconvenient as a crumbling in global growth prospects.