How China’s Population Will Influence the World

Royal Wedding preparations are in full swing in the historic town of Windsor, with 600 guests expected to attend.

If you weren’t aware, there is only one day to the Royal Wedding. I mean, it’s hard to miss it, Prince Harry’s and Meghan Markle’s faces are everywhere you look.

But, what does the royal wedding have to do with China…or economics? After all, this is a financial newsletter.

Well, there is a link. Let me explain.

It relates to something a friend of mine who works near Windsor told me recently.

If you have ever been there, you know that Windsor is quite a small town. The town has about 30,000 inhabitants.

Yet with the Royal Wedding, the population is expected to more than triple this weekend. That is, they estimate 100,000 people will be visiting the area for the wedding.

And, as my friend told me, locals are making a small fortune renting their places to TV crews, journalists and visitors.

How much?

Well, as reported by Express:

Homeowners in Windsor who live close to the spot where Prince Harry will marry his bride Meghan Markle in May are charging up to £15,000 per night to people who want to attend the wedding.

‘One homeowner told The Daily Star Sunday: “We’ve all been contacted by TV channels and things like that. I’ve been offered £10,000 to move out for the week and I’m seriously considering it.”

‘A pub, called The Horse & Groom has rented two rooms above the bar to American tourists for £15,000 a night, according to locals.

‘And, Sam Glancy, the landlady for The Carpenters Arms pub said that she has rented out one floor to the US broadcaster NBC News for around £30,000.

The law of supply and demand, right?

But, it is not just Windsor, it is also the surrounding areas who are benefitting. As CTV news reports,

Airbnb says the “unlikely tourist hotspot Slough,” which is an approximately 10 minute drive from Windsor, has seen an increase of 1,438 per cent in guest arrivals on the rental website when compared to the same period last year.

‘Surrounding areas have also seen an increase in guest arrivals, with Maidenhead increasing by 364 per cent while arrivals to Windsor are up by 194 per cent and Reading by 57 per cent…

‘While patriotic Brits rank high among the nationalities flocking to London for the royal wedding, Americans are number one on the list, rounded out by France, Germany, and Australia.’

The wedding will bring in a lot of money into the area…and even into Britain.

According to People magazine, the Royal Wedding could bring in as much as US$680 million from tourism and local spending. Not too shabby…

Which led me to thinking about the effects of tourism and large influxes of people.

What country has the biggest ‘crowd’ in the world?

Well, China.

China has almost 1.4 billion inhabitants. I’ll say it again…1.4 billion inhabitants.

That’s a lot of people.

China has a huge population, yet it also has a growing middle class. Incomes in China are rising quickly.

Since 1990, China has lifted over 800 million people out of poverty. Just think about the numbers…that’s 33 times Australia’s population.

And, this newly affluent middle class is travelling…and spending big.

As the United Nations World Tourism Organization reports, China is the biggest spender in the world. Chinese spent US$258 billion worldwide in 2017.

World's top tourism spenders 2017


Source: UNWTO
[Click to enlarge]

And, more Chinese are starting to travel abroad. According to Traveller, in the year 2000 only 10.5 million Chinese went on trips overseas. Last year that number was 145 million. That’s an over 1300% increase.

And these numbers could get much bigger.

You see, as Traveller continues, only 10% of the Chinese population currently have a passport.

What are the top destinations?

Hong Kong, Macau, Taiwan, Thailand, Japan, Vietnam, South Korea, Singapore are in the top spots.

But, what’s more, China is not only affecting its neighbours with tourism, but with the Belt and Road Initiative (BRI) also. This is China’s plan to revive the old Silk Road, which was a network of trade routes.

How will tourism and BRI affect the area?

Well for one there is infrastructure. Such an influx of tourism will mean that neighbouring countries will need to build on existing infrastructure to accommodate it.

This is already starting to happen. As reported by Forbes:

China’s growing middle class is leveraging higher wages and the One Belt, One Road initiatives into the chance to explore Southeast Asia, and countries are scrambling to serve their incoming guests’ needs.

‘Tourists from China have become one of the biggest blocs of visitors, starting to outnumber the traditional backpacking crowd. Vietnam brought in 60% more Chinese tourists in the first quarter of this year, tapping into an expanding market that Thailand has already capitalized on, and Cambodia saw a 45% growth in tourists in three quarters this year, according to Xinghua Daily.

‘In the region’s developing countries, China’s One Belt, One Road investments in transportation routes have started to open up new destinations for the nation’s travelers.

And, it could have a large effect on property in the area.

As China Daily reported:

Property markets in major Southeast Asian and South Asian countries will benefit from China’s Belt and Road Initiative in the coming five years, with Indonesia and the Philippines likely becoming the biggest winners, a Colliers International report said…

‘The report from real estate consultancy Colliers International indicated that Chinese investment in property in Southeast Asia and South Asia reached $2.5 billion in 2017, nearly four times the level of 2016 and the second highest after $4.1 billion in 2013…

‘China has become an increasingly important player in global property markets. According to Real Capital Analytics (RCA), outbound Chinese real estate investment reached an all-time high of $39.5 billion in 2017, which represents a sevenfold increase from 2012 and an 8 percent rise year-on-year.

We have seen some of the effect here in Australia too. As you can see in the chart below, Australia has seen a big increase in Chinese visitors in the last years.

Chinese short-term visitor arrivals to Australia


Source: Business Insider
[Click to enlarge]

And, we could see this trend to continue increasing as more Chinese start travelling abroad.

Best,

Selva Freigedo,
Editor, Markets & Money

PS: China’s large population will play an important role in the world. That’s why Harje has launched Wealth Eruption, a service that looks at companies that could boom based on China’s growth. But, this opportunity to invest in China’s new economy won’t be around forever. If you want to learn more, click here.


Selva Freigedo is an analyst with a background in financial economics. Born and raised in Argentina, she has also lived in Brazil, the US and Spain. She has seen economic troubles firsthand, from economic booms to collapses and the ravaging effects of hyperinflation, high unemployment, deposit freezes and debt default. Selva now writes from her vantage point here in Australia. She is lead Editor at the daily e-letter Markets & Money. And every week, she goes through each report and research note produced by our global network of trusted advisors to find the best investment opportunities for you in Australia and overseas. She packages these opportunities for you in Global Investor.


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