Inbound tourism and bilateral trade, evidence from China

ABSTRACT

This paper examines the nexus between inbound tourism and bilateral trade in the context of China. Within a gravity model framework, both the cointegration approach and fixed-effects panel technique is applied to conduct the research. The long-run equilibrium relationship between China’s inbound tourism and its bilateral trade flows is ascertained through cointegration tests. Results also show that foreign tourists are positively associated with trade flows between China and its tourism origin countries, while inbound leisure tourists to China have a larger effect on bilateral trade than business tourists. In addition, China’s export activity is more elastic to inbound tourism than is its import activity. These findings reveal important patterns that are useful for policymakers to promote international trade regarding the different influences of inbound tourism. Further, this study extends research on China’s inbound tourism and bilateral trade by providing new empirical developments.

KEYWORDS:

• Inbound tourism
• bilateral trade
• gravity model
• China

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 Country list: Australia, Canada, France, Germany, Indonesia, Italy, Japan, Korea, Malaysia, the Netherlands, New Zealand, Russia, Singapore, Sweden, Thailand, the United Kingdom, the United States.

2 The Harmonization System (HS) code is the general identity certificate of import and export commodities. HS1996 refers to the second version of the HS code edited in 1996.

3 IMF’s Extended Balance of Payments Services Classification.

4 The code was provided by Joakim Westerlund and can be obtained at https://sites.google.com/site/perjoakimwesterlund/home/gauss-codes

5 The underidentification test of IV is not supported under a G2SLS estimation scheme.

6 The null hypothesis is that instrument variables are under-identified.

7 Large value of Kleibergen–Paap rk Wald F statistic indicates that the correlation between instrument variables and endogenous explanatory variables is strong.

8 The null hypothesis is that all instrument variables are exogenous.

Additional information

Funding

This research is supported by the Research Development Fund of Xi'an Jiaotong-Liverpool University, [grant no. RDF 18-01-01].