Economy

China bans hit $3.5b of tourism, education exports

The ban on visitors from China will hammer our second biggest tourist market and block the biggest source of international student revenues. Bernard Hickey surveys the economic impact of an unprecedented move.

New Zealand has followed America and Australia in banning arrivals from China to contain the spread of the Wuhan coronavirus, but the New Zealand economy is much more exposed to a full halt of tourism and international education than either of them. The Government has said it may have to provide financial assistance to those businesses most affected.

Tourism and education are our first and fourth biggest sources of export earnings respectively, with China the second largest provider of tourists behind Australia, and the largest source of international students.

Combined, exports of tourism and education to China generated almost $3.5b last year or just over one percent of GDP.

Tourists from China were forecast to spend around $2 billion in New Zealand in 2020, making them the second biggest source of revenues for our largest export industry. The period around the Chinese New Year is a crucial time, with nearly 95,000 arrivals from China in January and February of 2019. They are estimated to have spent $550 million over those two months, including around $50 million in GST for the Government.

But this year, arrivals in January had already been severely curtailed ahead of the Lunar New Year on January 25 because of China's own ban on group travel and restrictions placed on travel within China around the key Spring Festival that coincides with New Year celebrations. The ban imposed on arrivals to Auckland and Christchurch airports from midnight on Monday for at least two weeks could wipe out the rest of the revenues in these two key months.

Students from China make up around a third of the total earnings from international education of around $4.8 billion. The ban is kicking in right at the start of the academic year.

China is also Australia's largest trading partner and China takes around 31 percent of Australia's exports (China provides around 22 percent of New Zealand's export revenues). But tourism and education are relatively less important for Australia than for us, given iron ore and coal exports are four times more valuable than education and tourism. Tourism is only Australia's third largest export earner.

Tourism and international education are also much less important to the US economy than to either Australia's or New Zealand's, given the size of America's domestic economy.

Ban starts midnight

Prime Minister Jacinda Ardern announced the temporary ban on Sunday afternoon with the ban itself kicking in at midnight on February 2. It will last for at least two weeks, with a review every 48 hours.

She said New Zealand citizens and permanent residents returning to New Zealand would still be able to enter, as will their immediate family members, but would be required to "self-isolate" for 14 days when they get back.

The Ministry of Foreign Affairs and Trade has also warned New Zealanders "Do not travel" to mainland China, which is its highest level of warning.

“Cabinet convened last night to discuss the most up to date public health advice and recent developments in the spread of the virus. We have been advised by health officials that while there are still a range of unknowns in the way the virus is being transmitted, we should take a precautionary approach and temporarily stop travel into New Zealand from mainland China, and of people who have recently been in China,” Ardern said.
 
“It is critically important that we both protect New Zealanders from the virus and play our part in the global effort to contain it," she said in the statement.
 
“I am particularly mindful that we are a gateway to the Pacific, and must factor that into our decision making."
 
Ardern said she had spoken several times to Australian Prime Minister Scott Morrison over the weekend, and noted decisions by Air New Zealand, Qantas and others to stop flights from China.

“The Cabinet is acutely aware of the economic impact of the virus, including on tourism, the primary sector and education. I have asked Ministers to make contact with industry leaders to mitigate some of these impacts as much as possible,” Ardern said.
 
'Not taken lightly'

Deputy Prime Minister and Foreign Minister Winston Peters stressed this was not a decision that has been taken lightly.
 
“Ultimately, this is a public health decision. The outbreak has been well managed by China, and these temporary measures are to reinforce work being done to try and reduce human to human transmission," Peters said.
 
“New Zealand has not had a confirmed case of the virus and the risk of outbreak is low and we want to keep it that way.  The health and safety of New Zealanders is our main priority," he said.

Too slow?

Speaking to media in Kaikohe, Ardern defended the pace of the Government’s response compared with countries like Australia, saying New Zealand’s own circumstances had to be discussed with public health officials.

“Within a 24-hour period...that we've had, we've also made contact with our airlines, with border control and Immigration New Zealand.

“This is a significant undertaking, we do have to make sure it causes the least disruption as possible to people who already may be on their way, and also put in place plans for people who will need to exit eventually once they’re finished maybe their current holiday in New Zealand, for them to be able to exit, so we needed to make sure plans were in place and also assess the information.”

Ardern also spoke to her chief science adviser and other experts in the extra time, she said.

The decision to allow returning New Zealanders to self-isolate, rather than banning them from entering as well, was a practical one.

“For the New Zealanders who are returning home, they have a place in which they can do this, they are able to remain within their own home. With someone who may be coming into New Zealand as a tourist, the purpose of travel is to visit New Zealand and to travel around New Zealand," she said.

“Isolation for those individuals is much less practical, much more difficult to enforce, and therefore controls at the border are seen as a much more efficient way to deal with that issue.”

The Government was taking advice from Tourism New Zealand on what support it could provide to any tourism operators who would suffer financially as a result of the ban, she said.

(Additional reporting by Sam Sachdeva at Kaikohe)

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