1 China’s improved May Day tourism figures don’t tell the full picture
May 3
1. The PRC Ministry of Culture and Tourism announced that 274 million domestic trips were made during the May Day holiday period (five-day break starting April 29), or up 70.8 percent when compared to the same period in 2022 and 19 percent more than during 2019.
Domestic tourism revenue during the holiday hit 148.05 billion yuan, up 128.90 percent from a year ago and roughly the same level (100.66 percent) as in 2019.
2. The Wall Street Journal reported that Chinese tourists were the biggest-spending group in the world, citing World Tourism Organization figures as showing that Chinese tourists spent about $250 billion on travel abroad in 2019.
The Journal also cited Nomura’s Hong Kong chief China economist Ting Lu as writing that outbound flights in April 2023 were roughly 35 percent of their 2019 level.
May 4
1. Mainland media Yicai reported that the phrase “special forces tourism” (特種兵旅遊) trended during the May Day holiday. “Special forces tourism” refers to the phenomenon where some tourists visit multiple scenic spots in a very efficient manner over a short period of time. While “special forces tourism” is less expensive, it is hectic and requires the tourist to be in good physical shape and be comfortable with traveling independently, hence the name.
Yicai said that young people, and especially college students, form the bulk of those engaging in “special forces tourism.” These travelers tend to make their trips over the weekend break or during holiday periods, and spend less than 500 yuan (about over 100 yuan per day on food, accommodations, and transportation) for a trip of about three days.
2. Mainland media reported that tourists and online celebrities have been flocking to Zibo City in Shandong Province during the holiday period. The Zibo local authorities reported that hotel bookings were up 800 percent during the May Day period as compared to 2019. Train tickets from Beijing to Zibo on May 1 were also sold out within a minute after they were released.
People are traveling to Zibo for its cheap barbecue, college student promotions (the local authorities offered free barbecue meals to college students after the lockdowns were lifted), internet trends (partly boosted by college students talking up the free barbecue offers), and because the local authorities turned Zibo into a “barbecue city” by rolling out policies that made it more convenient to travel and stay in the area (Zibo’s Haiyue Longgong barbecue market can accommodate nearly 10,000 people). The Zibo authorities also notified local businesses and the community that rip-offs and other behavior that damages the city’s image will be dealt with in a timely manner, while the Zibo Party secretary pledged to “smash the bowl of whoever smashes our pot” (誰砸了我們的鍋就砸誰的碗).
Our take
At a glance, the tourism numbers from China’s May Day holiday seem like an optimistic note for the Chinese economy, which is seeing sluggish recovery and lackluster performance. However, the CCP’s own data, media reports, and information circulating on social media regarding traveling suggest that the tourism situation is less sanguine than depicted in CCP propaganda and consumption remains weak in China.
Per official data, there were 195 million domestic trips during the May Day holiday in 2019, with a domestic tourism revenue of 117.67 billion yuan and a per capita consumption of 603 yuan. This is compared with 274 million domestic trips in 2023 and a per capita consumption of 540 yuan, or a 16.4 percent decrease. Put another way, more people are traveling but they are also spending less as well, especially after accounting for inflation.
The per capita consumption figure for domestic holiday travelers in 2023 looks even worse after accounting for currency depreciation. While the increase in the M2 broad money supply does not directly capture the degree of currency depreciation, it is connected to a certain extent. Currently, the M2 balance at the end of March 2023 is 281.46 trillion yuan, or 1.49 times the balance at the end of April 2019 (188.47 trillion yuan). Meanwhile, the domestic tourism revenue for this May Day holiday (148.05 billion yuan) is just 1.26 times that of 2019 (117.67 billion yuan).
The rise of “special forces tourism” and the popularity of cheap barbecue in Zibo City also reflect the decreased spending power of Chinese residents and how the improved domestic trip numbers in 2023 as compared to 2019 can be misleading. While the desire for travel has definitely gone up after “zero-COVID,” Chinese residents are doing so on shoestring budgets. Also, going to Zibo alone would check many boxes for the long-cooped up residents: Zibo’s barbeque market is a popular and trendy tourist spot that allows people to soak up the atmosphere, build pleasant memories of a better time, and spend relatively little (50 to 100 yuan per person) to have as much barbecue as they can eat.
As people flock to Zibo, fewer are traveling to previous hotspots like Lijiang City in Yunnan Province and other areas that are pricier and known for serious scams, according to mainland media and social media reports. Mainland media also report that European cities were not on the list of the top ten popular destinations during this May Day holiday, being replaced on the list by Asian cities. Visa and other travel restrictions aside, Chinese tourists could be less inclined to travel to Europe due to rising prices there and their own thinning wallets.
2 Taiwan raises concerns as the PRC and the US continue preparing for conflict
In an interview with the Associated Press published on May 4, Taiwan’s chief trade representative John Chen-Chung Deng said, “We should avoid any exaggeration or rhetoric which doesn’t reflect the true situation, that creates fear … unnecessary fear.”
Deng made his remarks during a trip to Washington, where he is leading a trade delegation and meeting with U.S. officials. Deng’s comments also come amid recent efforts by the United States and the People’s Republic of China to get ready for a potential crisis in the Taiwan Strait.
PRC actions
May 1
1. The State Council and the Central Military Commission approved revised regulations on conscription based on the PRC’s military service law.
One of the revisions would make it easier for retired soldiers to rejoin their old units or perform previous duties to help the military secure experienced personnel. Another change would make it easier for the PLA to draft people in the event of an emergency, including allowing the PRC government to tweak the conditions and method of conscription depending on the types of personnel required, as well as enabling the supply transportation corps to prioritize the transportation of military forces for rapid deployments.
The revised regulations also allow colleges and other institutes of higher learning to draft students at the site of their family household registers or where the schools are located.
2. The PRC and Singapore concluded a joint naval drill in the South China Sea. The Singapore defense ministry said that the exercise underscores the “warm and friendly bilateral defense relations” between both countries.
May 2
Japan’s defense ministry said that it scrambled a fighter jet after spotting a suspected PLA drone between the Japanese island of Yonaguni and Taiwan. The drone had flown toward the Bashi Channel between Taiwan and the Philippines.
May 3
Taiwan’s defense ministry said that a PLA long-range reconnaissance drone had circled the island.
May 5
The PLA Southern Theater Command announced that it would send troops to Laos for a joint exercise from May 9 to May 28.
US actions
May 3
1. Senate Democratic leader Chuck Schumer and Democrat committee leaders said that they would write legislation that could be introduced in the next several months to “limit the flow of technology to China, deter China from initiating a conflict with Taiwan, and tighten rules to block U.S. capital from going to Chinese companies,” according to a Reuters report.
Schumer dubbed the bill “China Competition 2.0” and said that it would broaden the “Chips and Science” act from 2022. While Schumer is hoping that the bill would receive bipartisan support, John Thune, the number two Republican in the Senate, said that getting it through Congress would be “challenging, and partly because of spending and debt — concerns about too much spending and the impact it’s had on inflation, the way the deficits exploded and ballooned.”
2. Lt. Gen. Steven Rudder, a retired senior U.S. Marine Corps leader, said at the Taiwan-U.S. Defense Industry Forum that the United States wants to be part of Taiwan’s defense capabilities and improve the ROC’s supply chain resilience.
“For the Asia-Pacific, I would offer there’s not another more important area in the world to maintain peace. So (when) you hear ‘a free and open Indo-Pacific,’ this is a small part of ensuring that shared vision remains intact,” he said.
Taiwanese media reported that the U.S. and Taiwan are looking at cooperating in producing certain products, and part of the cooperation would be ensuring that both sides can work together to use the weapons system Taiwan buys alongside its existing self-produced defense capabilities. “I’ll say it very simply: The endgame is joint interoperability,” Rudder said.
May 4
1. Director of National Intelligence Avril Haines said in a hearing of the Senate Armed Services Committee that the PRC is “increasingly challenging the United States economically, technologically, politically, militarily, and from an intelligence standpoint around the world.”
“We assess that the Chinese Communist Party under President Xi Jinping will continue efforts over the next year to achieve Xi’s vision of making China the preeminent power in East Asia, and a major power on the world stage,” she said. “What is perhaps most concerning is that the CCP is increasingly convinced that it can only fulfill Xi’s vision at the expense of U.S. power and influence, and through tools of coercion.”
Haines also said that “China seeks to divide us from our allies and partners, and then frame U.S. actions as provocations that provide the basis for [pre-]planned aggression, which they then claim are just responses.” This “increasingly aggressive approach” is designed to help the regime “to reshape global governance in line with Xi’s preferences” and further solidify the CCP’s “monopoly of power in China.”
With regard to Taiwan, Haines said, “I think we continue to assess that he (Xi) would prefer to achieve unification of Taiwan through peaceful means.” She added that Xi directing the PLA to “provide him with a military option, essentially, to be able to take it without concern of our intervention” would have a “meaningful impact on his capacity to do so.”
2. The U.S. and the Philippines issued bilateral defense guidelines reaffirming that “an armed attack in the Pacific, including anywhere in the South China Sea, on either of their public vessels, aircraft, or armed forces – which includes their Coast Guards” would invoke defense commitments under the U.S.-Philippines Mutual Defense Treaty.
The guidelines also recognized that “threats may arise in several domains – including land, sea, air, space, and cyberspace – and take the form of asymmetric, hybrid, and irregular warfare and gray-zone tactics.”
3. Philippines president Ferdinand Marcos Jr. told Reuters that granting the U.S. access to Philippines military bases would be “useful” if the PRC invaded Taiwan. Marcos added that Washington “has not proposed any kind of action for the Philippines in terms of taking part in the defense of Taiwan.”
4. Christopher Wilson, assistant U.S. Trade Representative for Japan, Korea, and APEC, told reporters in Washington that the PRC’s “economic coercion” would be one of the issues that the U.S. is looking to discuss with China and “other trading partners who share those concerns” during APEC talks in Detroit from May 25 to May 26.
May 5
Reuters reported that the Biden administration plans to send $500 million worth of weapons to Taiwan using the Presidential Drawdown Authority (PDA), citing a source familiar with the matter. The PDA is an emergency authority that allows the president to transfer articles and services from U.S. stockpiles without congressional approval, and has been used over 35 times to send arms to Ukraine.
Congress had authorized up to $1 billion worth of weapons aid for Taiwan as part of the 2023 budget, and the $500 million would come from authorization. Reuters wrote that it is unclear what is included in the aid package and when it would be delivered.
Backdrop
Sino-U.S. tensions have been steadily heating up since the start of the year. Topics like a potential PLA invasion of Taiwan, PRC surveillance operations, aggressive “wolf warrior” diplomacy, Beijing’s growing authoritarianism, and various influence operations (undermining democracy in Canada, etc.) are increasingly becoming a part of the public discourse.
Our take
1. The remarks by Taiwan’s chief trade representative John Deng suggest that Taipei wants U.S. and international support to deter PRC aggression, but is wary of provoking a crisis and sparking a panic that would ultimately hurt Taiwan’s interests. Taiwan’s concerns mirror our own (based on our observation of actions from the U.S. and its allies, as well as our understanding of how the CCP would view those actions and could react) and those of Bridgewater founder Ray Dalio (though Dalio approaches the topic from a pro-Beijing angle). Going forward, Taiwan could resort to tactful ways to court U.S. and international support on the PRC threat while signaling its discomfort with rhetoric and actions that do not properly capture the actual situation and stoke fear.
U.S. efforts to arm Taiwan per existing agreements would help the ROC with its combat readiness and make the PRC think twice before considering an invasion. The PRC, however, will likely stick to “peaceful reunification” (Director of National Intelligence Avril Haines has also made this assessment that we have long been stating) until all options for doing so are exhausted or circumstances change to force Beijing’s hand.
Beijing could adjust its “peaceful reunification” plans and be more willing to consider an invasion if the U.S. makes blatant attempts to “Ukrainify” Taiwan (i.e. overly zealous efforts to send Taiwan weapons, arm the island with sophisticated weaponry, train its population militarily, etc.) or crosses certain “red lines.” To take the U.S. and China away from the “brink of war” during the crucial 18-month period that Dalio identified and beyond, Washington should, as we earlier noted, “consider moderating its hawkish approach to tackling the CCP threat and lean more towards challenging the PRC on issues such as human rights, universal values, and morals. Washington would also benefit from focusing international efforts on exposing the CCP’s Marxist-Leninist ideology, propaganda, disinformation, and various influence operations.”
2. Avril Haines’s testimony to the Senate Armed Services Committee suggests that the Biden administration is differentiating between Xi Jinping and the CCP (i.e. “the CCP under President Xi Jinping,” “the CCP is increasingly convinced that it can only fulfill Xi’s vision,” etc.). This differentiation is in line with the “anti-Xi, not anti-CCP” strategy outlined in “The Longer Telegram” report that we previously analyzed and found to be fundamentally problematic.
As we previously wrote, “Xi is a symptom, and not an aberration, of the Party system. Because the CCP’s cutthroat political culture does not lend itself to change, Xi’s successors, far from ‘reforming’ the Party, could ultimately prove to be just as willing—if not politically obliged—to continue in the same pernicious cycle of expanding regime power and human rights abuse.” Further, Xi’s successors would likely be forced to be even more hardline than him in the event that Xi Jinping is ousted over geopolitical issues. Instead of deterring an invasion of Taiwan through “leadership change,” Washington risks making conflict inevitable by pursuing measures and sticking with rhetoric that conforms to the “anti-Xi, not anti-CCP” strategy. It would be both more effective and accurate for the Biden administration and those who are serious about countering the PRC while minimizing risks to call out “Xi Jinping and the CCP” instead of seeing the Party as a mere instrument of Xi’s ambition.
3. Growing geopolitical pressures are unlikely to threaten Xi Jinping’s position for the time being given his present control over the regime and ongoing efforts to strengthen that control. However, the intensification of the PRC’s internal and external crises is likely to shift Xi’s calculations in factional struggle and force him to act bolder and more quickly to eliminate his lingering political rivals and thoroughly “rectify” the regime of their influence.
This means that the Xi leadership could step up its various political campaigns, particularly the anti-corruption effort and “Xi Jinping Thought” indoctrination campaign, in an attempt to ensure that the officialdom remains firmly loyal to Xi as things take a turn for the worse in the regime. Xi could also publicly move against the remnant Jiang faction (including officials such as Liu Yazhou) and denounce the “incorrect political line” of Jiang Zemin sooner rather than later to take some of the pressure off himself.
