"Japan Is Out, Korea Is True Love"...Chinese Tourists Return for Mask Packs, Not Luxury Bags [Weekend Money]

"More Chinese Tourists Expected to Visit Korea Thanks to China-Japan Tensions"
Rising Consumption Activity to Boost Service-Sector Output and Employment

With China's biggest holiday, the Spring Festival, running for a record-long nine days (February 15 to 23), it is expected to bring renewed vitality to South Korea's tourism industry.

On the 18th, the last day of the Lunar New Year holiday and during China's Spring Festival holiday, the Myeongdong shopping street in Jung-gu, Seoul is bustling with tourists. Photo by Moon Honam

In a recent report, Ryu Jin-yi, an economist at KB Securities, stated, "With the Spring Festival holiday extended compared to previous years (7 to 8 days), and with South Korea benefiting from China-Japan tensions, the number of Chinese tourists visiting South Korea is expected to increase."

After the Chinese government advised against travel to Japan in November last year, the number of Chinese tourists visiting Japan in December of the same year plunged by 45% year-on-year. In contrast, the number of Chinese tourists coming to South Korea over the same period remained stable.

As of last year, excluding Hong Kong and Macao, South Korea was the second most-visited country by Chinese tourists after Japan. According to China Trading Desk, a market research firm specializing in Chinese travel, South Korea is expected to become a major tourist destination replacing Japan.

KB Securities analyzed that the consumption patterns of Chinese tourists have changed. The share of spending on shopping businesses in total tourist consumption fell from about 70% in 2019 to 51% as of last year. In contrast, the share of spending on beauty and medical tourism has doubled compared with 2019.

Economist Ryu analyzed, "Demand for buying large quantities of goods at duty-free shops and reselling them in China has structurally weakened, while the boom in K-beauty has turned Olive Young and pharmacy cosmetics, now essential stops on Korean itineraries, into the main drivers of growth in the beauty market, with additional support from rising medical tourism revenues at plastic surgery and dermatology clinics."

On the 18th, the last day of the Lunar New Year holiday and during the Chinese Spring Festival holiday, Myeong-dong shopping street in Jung-gu, Seoul is crowded with tourists. Photo by Mun Honam

Shopping locations are also shifting away from tourist-only channels such as duty-free stores and toward downtown commercial districts such as convenience stores and clothing retailers, where visitors can experience uniquely Korean culture. The concentration of tourism in Jung-gu, where Myeong-dong and Dongdaemun are located, fell from the 50% range in 2018 to 30% last year.

The increase in tourist inflows leads to higher production and employment in the service industry. Since the pandemic, the correlation between tourist inflows and service-sector production and employment has strengthened. According to the Korea Tourism Organization, recent tourist spending patterns show that the average amount spent per transaction has decreased compared with before the pandemic, but the number of transactions has increased. This is because purchasing behavior has shifted from "a few high-priced items" to "practical purchases of many different items."

Economist Ryu said, "As the volume of consumption activities increases, demand for service personnel for customer service and operations rises, leading to more hiring and amplifying activity in related industries," adding, "As tourist inflows add growth momentum to service exports and employment in the service sector, which accounts for 80% of total employment, also expands, this is expected to contribute positively to the South Korean economy."