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14 December 2016

Russia has emerged as a serious competitor for lucrative Chinese tourism, but the country needs to step up its efforts if it is to remain a real player in the long-term, Bethany Schoer writes.

Australia, the United States, and France may be perennially popular tourism destinations for Chinese nationals, but Russia has surprisingly emerged as a promising option for both young and old Chinese travellers in recent years.

This upswing began in 2014 when Chinese nationals relegated their German counterparts to second place to account for the highest number of inbound tourists to Russia, primarily to Moscow, Kazan, St Petersburg, Sochi and even Murmansk. Facilitated by the establishment of selected visa-free travel opportunities between the two countries, as well as a burgeoning Chinese middle class with disposable cash and bargaining power, Oleg Safonov, the Head of Russia’s Federal Tourism Agency, reported additional growth of 21 per cent in the number of tourists from China to Russia the following year.

Yet what started this so-called “strategic switch from West to East” and perhaps most importantly, why it has it happened now?

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Chief among the driving factors is the weak ruble, which has encouraged Chinese tourists to consider Russia as a destination for tourism. According to a report compiled by the KMP Group, a growing number of affluent yet price-sensitive Chinese tourists are opting to travel to cities close to the Sino-Russian border, allocating around 60 per cent of their travel budgets to shopping and spending up to US$4,000 per trip.

The Chinese Central Bank’s decision in 2015 to implement a dual currency ruble-yuan system in the Sino-Russian border city of Suifenhe has intensified the strength of this recent trend.

Even further afield in Moscow, signs adorned with Mandarin text at the city’s major shopping complexes vaunt lower prices compared to Hong Kong. Aided by intensively targeted marketing strategies US$1 billion was spent by Chinese nationals visiting Russia in 2015. While these figures are a mere drop in the ocean relative to more popular tourist destinations, the potential for further growth has been hinted at in line with increased Sino-Russian bilateral trade and economic opportunities.

But cheap prices and proximity aren’t the only things luring China’s tourists to Russia. A desire to reconnect with Communist ideology is also proving popular among Chinese nationals, particularly those aged between 50 and 70.

Sensing a lucrative opportunity to both perpetuate the idea of the initial halcyon days of Communism and to fortify bilateral political and economic ties, Li Jinzao, Director of the Chinese National Tourism Administration and Safonov formalised “Red Tourism” by authorising ten additional tour routes between Russia and China in June 2015 with the support of 20 private tour enterprises.

These initiatives have borne fruit, due in part to subsidised travel opportunities for older party members. Russia witnessed a 47 per cent increase in the number of Chinese tourists visiting Russia as part of organised group tours during the first four months of 2016.  Among popular attractions on this route is Novodevichy Cemetery, at which Chinese tourists have paid their respects to prominent Chinese Communist Party member Wang Ming. With the 100th anniversary of the Bolshevik revolution on the horizon, demand for tours to key Communist sites from within China’s senior demographics is expected to soar.

This anniversary isn’t the only thing that explains Red Tourism’s sudden growth in popularity, however. To many Chinese nationals, the Brexit vote and the election of Donald Trump signify a tipping point in the legitimacy of Western democracy. Terrorist attacks across Western Europe have also diminished its appeal as a tourist destination for many Chinese nationals, with France24 reporting a decline in Chinese tourist numbers to Paris alone by 5.7 per cent in August this year.

Clearly, in creating opportunities to engage in guided Communist-themed travel, the Chinese Communist Party has identified a means through which it can assert soft power over its citizens and take advantage of apparent ideological ruptures and international political tumult.

But does this represent a viable long-term economic opportunity for Russia? Two key reasons suggest otherwise.

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The first is that a great deal of the success behind the growth in Chinese tourist numbers to Russia has been built around transitory hype. Efforts to attract Chinese tourists have occurred in response to recent global political trends, namely the growth of the Chinese middle class and an emergent suspicion towards Western democracy. Russia ultimately must commit to reframing this task from being a reaction to global events to an enduring source of national revenue. In doing this, it should continue to pay attention to key drivers of economic growth and individual purchasing power in China, and identify ways to leverage its appeal against more preferred destinations. Already this seems far too big an ask if Russia wants to see a sizeable return-on-investment in the immediate future.

The second reason stems from a notable lack of private and public sector cooperation within Russia. This is essential for growth in tourist numbers for any country, not only to pool resources and capabilities between relevant government bodies and private tourism enterprises but also to improve infrastructure and public services across multiple cities and regions.

Russia’s Federal Law No. 224 on public-private partnerships came into force earlier this year, aiming to simplify and standardise the processes behind the creation of these partnerships. Yet despite this reform, motivation has proven to be almost absent in Russia to date. Additionally, traditionally popular tourist destinations such as the United Kingdom, Australia and New Zealand have amassed considerable experience in establishing and maintaining public-private partnerships. Hence for Russia, making up lost ground in this field is unfeasible and could, in fact, pave the way for greater corruption and more loopholes through inadequate procedures created haphazardly within a short period of time. The quality of the Chinese tourist experience would be diminished and with it, Russia’s chance of long-term revenue growth.

While Russia has sensed in tourism a key opportunity to boost national revenue and an avenue through which it can improve ties with China, it should by no means be taken at face value. Russia must come to terms with the fact that capitalising on tourist numbers sustainably is a resource-intensive and multifaceted effort that requires input from various departments and institutions. After all, the ingredients are all there for Russia to rest on its laurels, but doing so would be premature and risk the long-term tourism benefits it could accrue.

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Schoer, Bethany. 2017. "Red Tourism - Policy Forum". Policy Forum.