Portfolio update September 2025
A weak month for the portfolio, but with three deep dives published, plenty to think about.
Outbound tourism is set to resume on 8 January 2023. Reading time: 11 minutes
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China will open up its borders on 8 January 2023. This comes after almost three years of total isolation from the world and will have major ramifications in Asia and beyond.
Since early 2020, Chinese outbound tourism has been almost non-existent:
The primary hurdles for travel have been government regulation when it comes to quarantine and passport issuance.
But in the past three months, we’ve seen gradual signs of loosening in China’s zero-COVID policy. Here’s the timeline from September 2022 onwards:
The main takeaway is that from 8 January, both cross-provincial and international travel will have resumed, with the only requirement being a PCR test before departure.
In my view, mainland Chinese are dying to travel again after three years of isolation. The revenge travel phenomenon is real.
According to a recent survey conducted by marketing agency Dragon Trail International, more than 1/3 of respondents said they would travel outside of mainland China within six months of travel restrictions being lifted:
Where will they go? The most popular Chinese travel destinations have historically been Japan, South Korea, Thailand and Singapore, according to this 2019 Weixin report:
But in late 2022, according to the above Dragon Trail’s survey, Hong Kong is now at the top of the list, followed by Japan.
When it comes to the spread of COVID-19, China’s reported infection numbers reached a peak on 2 December:
But since mass testing has been removed and asymptomatic cases are no longer reported, these numbers no longer tell us much about the pandemic.
According to Baidu search query data, the city of Beijing had already passed the infection peak in mid-December, with 30% of the population infected. A doctor in Shanghai said in early January that 70% of the city’s population had already been infected. And according to a Chinese research team quoted by Global Times, small- and medium-sized cities will see a peak in their outbreaks sometime between 1 January and the Spring Festival on 22 January. So it looks like we’re now very close to peak COVID-19 in China.
Transport data are showing early signs of recovery. For example, Beijing and Guangzhou’s subway traffic improved materially in the last week of December. Shanghai and Nanjing are getting closer to that point as well. I believe the ridership in most tier 1/2 city metro systems will recover in the next week or two.
Regarding cross-provincial travel, there are signs that air travel search query volumes were up significantly in late December 2022.
When China’s cross-provincial travel restrictions were removed on 7 December, Ctrip’s search query volumes shot up, almost immediately reaching 76% of the 2019 baseline vs about 50% previously.
Sanya hotel prices have recovered to pre-pandemic levels, and that’s another sign that cross-provincial travel is recovering well:
@Josh_Young_1 Also re. air travel, can't find reporting in English, but local news reporting Sanya hotels running full prices (was 50% off just a wk ago), air travel search volume up 160%, bookings up 30~75%, flights scheduled now above last week. Air travel is in full BURST recovery mode.
— Namniko (@xxxx_chen) 4:42 AM ∙ Dec 26, 2022
Cross-provincial travel will be massive during the Spring Festival in late January. Many haven’t visited their hometowns in three years.
The Hong Kong experience since it eased its quarantine requirements back in September may serve as a precedent for what will happen in mainland China. By mid-December, Hong Kong airport arrivals had recovered to 20% of the pre-pandemic / pre-protest level.
Hong Kong’s inbound tourism - the green and turquoise lines in the chart above - remained weak until December. But I believe that removing Hong Kong’s post-arrival testing requirements will finally lure foreign tourists to come back to Hong Kong.
Another positive sign is that Chinese airlines are gearing up for greater international travel. The number of scheduled international flights is now back to about 7% of the pre-COVID level and going up steadily.
A headwind for outbound travel is the rising number of restrictions from destination countries. By late December 2022, we’ve seen five separate countries restricting visitors from mainland China: Japan, India, Taiwan, Italy and the United States.
Another hurdle is that mask-wearing is still required in public places in both mainland China and Hong Kong. But I would imagine those restrictions will ease in the next few months as well.
Finally, a major worry has been whether new, more severe variants might have popped up in China. There’s anecdotal evidence of patients in China suffering from breathing issues, with their CT scans showing lung inflammation.
In any case, WHO met with Chinese officials in late December and has asked the National Health Commission to share sequencing data to ensure that it is indeed Omicron that spreading in China and not some newer, more problematic variant. The sequencing data retrieved so far suggests that there is no new variant.
I personally believe that the white lungs are from individuals previously infected with the original Wuhan strain. Nothing to be too worried about.
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