Tuesday, August 2, 2011

Free Independent Travelers Not Just Boost Taiwan Economy

Independent tourists from the mainland China can now go everywhere around the world. The mainland China has started implementing a new Free Independent Travelers (FIT) policy for cross-strait travel to Taiwan since 28 June 2011. New mainland Chinese faces have begun to appear in the streets of Taiwan and should boost the economy of the island. For most of these independent travelers, however, it should be their first time to visit Taiwan in the recent 62 years since the Chinese Civil War ended by 1949.

The below are the basic information of the Free Independent Travelers (FIT) program:

(1) The FIT program permits a maximum of 500 free and independent mainland Chinese travelers to visit Taiwan on a daily basis, without joining any registered group tour.

(2) In its initial stages, the FIT program is only open to local residents of three mainland China cities: Beijing, Xiamen and Shanghai. Prior to this FIT program, tourists from the mainland China were only permitted to visit Taiwan by joining registered group tours, with a maximum capacity of 4K entries each day.

(3) Free Independent Travelers (FIT) from the mainland China must age at least 20 and have banking deposit not less than NTD$200K (New Taiwan Dollars), or have an annual income over RMB 120K (NTD$500K approximately), or have to be owners of credit card.

(4) FIT from the mainland China can travel to Taiwan with their spouses or their direct kinship relatives. Students with age 18 or above can also be qualified. They need to come with no less than NTD $2 million travel insurance.

(5) The maximum period allowed to stay in Taiwan is increased to 15 days for the free independent travelers (FIT) from the mainland China. They need to have guarantee from their Chinese relatives but need not to pay any deposit payment for their Taiwan tour.

(6) In addition to cross-Taiwan Strait direct flight, FIT from the mainland China can also travel firstly to the offshore islands of Matsu and Kinmen by boat and then go from there to Taipei city by flight.

How about the potential economic benefits of the FIT program? We believe this program can bring huge business opportunities to Taiwan economy and the potential benefits are tremendous, for examples:

(i) Taipei Tourism Bureau (TTB) predicts that an annual number of 170K free independent travelers will visit Taiwan from the mainland China. It is expected conservatively that they can bring to Taiwan an annual economic benefits from NTD$9 to NTD$15 billion. According to previous data from the Mainland Affairs Council (MAC), more than 2 million tourists from the mainland China have already visited Taiwan and have created economic benefits of USD$3.8 billion since the Chinese central government started permitting limited cross-strait travel to Taiwan in June 2008. Just in 2010, visitors from the mainland China contributed approximately NTD$65 billion to Taiwan, helped raising its GDP (gross domestic product by 0.28%, according to the Taiwan Directorate-General of Budget, Statistics, and Accounting.

(ii) This time, for the FIT program, because these Free Independent Travelers (FIT) can stay for a longer period, tourism industry insiders of the island expect that there will have more than 90K FIT from the mainland China to visit Taiwan for the second half of this year. Based on the assumption of USD$250 daily consumption and an average of 7-day stay, these FIT will directly bring to Taiwan with more than NTD$4.5 billion worth of tourism industry businesses.

(iii) The Taiwan tourism industry should be a big winner from the Free Independent Travelers (FIT) program. For instance, Taiwan's major domestic air carriers, China Airlines and Eva Air, both expect higher profit earnings in this year due to the boost in cross-Taiwan Strait direct flights. In addition, many other FIT concept stocks have also appeared on the Taiwan stock market and have already gained upside strength.

(iv) Data from the Taiwan CEPD (Council on Economic Planning and Development) indicates that Taiwan will build a lot more hotels for the FIT program, thus will create over 22K jobs from now until 2013. Since the sharp decline of the local manufacturing industry in recent years after many Taiwan factories relocated to the mainland China for lower labor costs, this scale of fixed asset investment and job creation opportunities should be unprecedented for Taiwan. Now Taiwan KMT (KuoMinTang) government wishes that jobs to be created from the FIT program can help to compensate those jobs lost in the manufacturing sector.

(v) In fact, FIT from the mainland China will not only benefit tourism industry but also other service sectors in Taiwan. Many Free Independent Travelers (FIT) not just plan to visit Taiwan's famous tourist attraction destinations such as Taipei 101, Sun Moon Lake, the National Palace Museum, Alishan, local Shihlin night market, they even visit Taiwan for high-tech medical body check-up services and provide opportunities for more Taiwanese people to earn. The benefits of FIT program should cover a large variety of businesses in Taiwan economy, namely transportation, hospitality, airlines, restaurants, food vendors, and various department stores including shops that sell souvenirs and snacks. Some economists expected that the FIT program will bring an extra NTD$20 billion annually to boost the related Taiwan businesses. For example, this policy shall benefit the related retail giants in the region such as Sasa Cosmetics and Beauty (Stock Code: 178.hk).

Despite the huge economic benefits, a significant number of Taiwanese still opposes to this Free Independent Travelers (FIT) policy. Some of the reasons are purely for political security, as it is generally believed that the China Communist Party wants more exchanges between Taiwanese and the mainland Chinese that can promote its ultimate goal of political unification. Some others, however, do have economic concerns on rising property prices and inflation expectation that Hong Kong has experienced since a similar FIT program introduced to the city.

In any case, the Free Independent Travelers (FIT) program not only boosts the Tawian economy but has also started building a kind of new connection between Taiwanese and the mainland Chinese. Independent tourists from the mainland China can now travel freely on their own and can better experience life style of Taiwan. In the long run, we believe the FIT can further promote cross-strait relationship, people communication, political understanding, as well as mutual respect and trust.


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