Chinese tourists’ return isn’t what it seems to be

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Chinese tourists’ return isn’t what it seems to be


Chinese tourists line up in front of a duty-free store in central Seoul on Oct. 2, a Chinese national holiday. Many of the people lined up were buying duty-free items to resell back in China. [YONHAP]

After Beijing introduced a travel ban on group tours to Korea last March in retaliation for the terminal high-altitude area defense (Thaad) antimissile system, a different type of Chinese tourist has taken their place.

After Beijing partially lifted the travel ban in August, the number of tourists from China recovered slightly from last year’s levels.

But many Chinese individuals now recorded as tourists are, in reality, looking for jobs or are professional shoppers reselling goods back home. Both of these are far from being the ideal consumers that Korean retail businesses are looking for. The backfiring of a visa-waiver policy for the Olympics to attract tourists only increased undocumented immigration to Korea.

Visa-free Olympics

To attract tourists and increase sales of PyeongChang Olympic tickets, the Korean government offered visa-waiver programs for tourists coming from China between February and March who bought tickets that were worth at least 200,000 won ($177).

Though the program only allowed Chinese tourists to stay for a maximum of 15 days, many of them are now staying in Korea as undocumented immigrants.

“I gave 50,000 Chinese yuan [$7,280] to a broker who helped me come and find work in Korea,” said 35-year-old surnamed Song, who came to Korea this February through the visa-waiver program from his hometown in Harbin, where he worked as a farmer.

Instead of going to watch the Winter Games, Song headed directly to an apartment construction site in Gyeonggi, where the broker had secured him a job. Last month, he earned 3 million won, twice the annual profit he used to earn as a farmer.

According to the Ministry of Justice, 5,887 out of 34,062 Chinese citizens who arrived in Korea between February and March without a visa are now staying in Korea undocumented.

Where have the tourists gone?

While the number of Chinese tourists coming to Korea has recovered somewhat compared to last year, critics point out that many are incorrectly categorized as tourists by Korean authorities. In reality, they are only here to work or shop in bulk to resell goods back home.

According to the Ministry of Culture, Sports and Tourism, the number of Chinese tourists who arrived in Korea this August was 480,000, noticeably higher than the 330,000 last August.

“Though it is true that the number of individual tourists increased in recent months since the [travel ban] was enforced in retaliation over the Thaad antimissile system, if we take a closer look we can see that daigou [bulk resellers] and employment-seekers have grown at a faster rate,” said a spokesman from a travel agency.

Zhou, 38, who hails from Harbin, is categorized as a tourist in Korea. He is here on a temporary multi-entry C-3 visa allowing him to enter Korea multiple times within five years as long as the total stay is limited to 90 days. Zhou, however, is currently working as a laborer at a construction site.

Though visitors aren’t allowed to work on a C-3 visa, there are plenty of Korean construction firms that want to hire temporary Chinese laborers, many of whom volunteer to work for less than the minimum wage.

“Chinese workers come up to us to ask for work, offering cheap labor as long as we hire them,” said a manager of an apartment construction firm in Gyeonggi.

Other Chinese C-3 visa holders come in the form of daigou, or Chinese who go overseas to purchase goods in bulk to resell back in China.

“Once I come to Korea, I purchase around 5,000 Chinese yuan worth of goods, and then return home to sell them to acquaintances or online,” said 28-year-old surnamed Wang who frequently travel to Korea with a C-3 visa. “I have friends who sell in bulk professionally and earned enough to buy a house.”

The growth in daigou is reflected by the rise in number of foreigners who enter Korea through the Port of Incheon, one of the preferred points of entry for bulk buyers. The number of foreigners coming through the port was 41,000 this August, 60 percent higher than last August.


Falling profits

The changing nature of Chinese visitors to Korea is bad news for duty-free stores and hotels.

Korean duty-free stores earned 12.39 trillion won in total revenue between January and August, 35.9 percent more than during the same period last year, according to the Korean Customs Service. But their profits tell a different story. Lotte Duty Free, the country’s largest duty-free chain, saw its operating profit plunge from 330.1 billion won to 2.5 billion won last year, a 99.3 percent drop. Hotel Shilla and Shinsegae, other key industry players, saw similar drops in profit despite rising revenue.

Falling margins can be traced back to the fierce competition between duty-free stores to attract potential Chinese buyers. Duty-free stores frequently return a percentage of their sales revenue to tour groups and agencies for bringing in daigou, who often shop in groups, to their stores. Though this commission previously didn’t top 30 percent, the dearth of customers induced businesses to raise the commission up to as high as 42 percent recently.

“The duty-free stores are engaged in a sort of chicken game, as they don’t want to lose the daigou to competitors,” said a spokesman from a duty-free store who requested anonymity. “Though our profits suffer from catering to daigou, we need them to maintain our revenue levels.”

The domestic hotel industry is in a bigger rut, as many daigou opt to sleep in acquaintances’ homes to save money, while undocumented workers often sleep in residences provided by construction sites.

“We are now charging between 60,000 won and 70,000 won for rooms that we charged 100,000 won per night for three years ago, but still less than half of them are filled,” said one manager of a business hotel in Myeong-dong, central Seoul.

At Seoul Dragon City in Yongsan District, central Seoul, the country’s largest hotel, only 30 percent of rooms were occupied during the first half of this year.

While the number of hotels in Seoul rose from 161 in 2012 to 399 last year, according to the Korean Tourism Organization, the travel ban and subsequent lack of Chinese guests pushed many hotel owners to remodel the buildings into apartments or office spaces instead.

“I’m afraid that around 20 percent of the hotels in Seoul will close down within the next three years,” said Kim Dae-yong, a senior manager at the Korea Hotel Association.

Finding a solution

Some experts believe that Korean authorities should take time to reflect on the current state of Korean tourism and come up with ways to enrich tourists’ experiences in Korea and draw foreigners without relying on visa perks.

“Though Japan also has conflicts with China, the number of Chinese tourists traveling to Japan is increasing,” said Lee Youn-taek, a tourism professor at Hanyang University. “We have to reshape our tourism policy using a mid to long-term approach.”

After noting the increase in undocumented immigrants, especially since the Olympics, the government has taken steps to deal with the situation.

“We hired around 90 more employees to help curb illegal immigration from September,” said a spokesman from the Justice Ministry. “We will work with immigration authorities to investigate brokers and prevent unlawful residence through visa-free entry.”

“The government has to understand that there will be unwanted side effects from pursuing visa-free programs to increase tourism,” said Oh Soon-hwan, a tourism professor at Yong In University. “If the costs continue outweighing the benefits, however, the government should consider introducing strong measures.”

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