China’s cruise industry is finally set to sail

On October 1, the 930-passenger Zhao Shang Yidun (or China Merchants Eden) departed from Shenzhen on an eight-day “Charming South China Sea” cruise. It’s a landmark voyage, and not just because it transits one of the world’s most hotly disputed waterways. The ship, jointly operated by Viking Cruises Ltd and state-owned China Merchants Group, is the first five-star luxury ship dedicated solely to the Chinese market. Its maiden voyage is the result of a 15-year bet on the part of the government that cruising is the future of Chinese tourism.
Forty years ago, taking a cruise in China meant serving in the military or on a fishing boat. Actual tourist-oriented pleasure cruises only emerged in the 1990s, as an influx of foreign tourists spurred the development of luxury river cruises (particularly focused on the future site of the Three Gorges Dam). Upwardly mobile Chinese soon embraced the idea, drawing interest from international cruise operators. In 2006, Carnival Corp, the world’s largest cruise line, started offering five-day trips from Shanghai, bound for Japan and South Korea.
The challenges in those early days were considerable. China lacked infrastructure to receive large cruise ships, and the terminals where they docked were, in many cases, comically unfriendly to tourists. From the government’s perspective, a bigger issue was that the industry was dominated by foreign operators.
Not only did foreign companies operate the ships, they built them, too. China, with a shipbuilding industry all its own (largely focused on bulk and container ships)
coveted a piece of that business.
In 2008, China’s top economic planner issued guidelines for the development of a domestic cruise industry.
The state’s growing interest in the business paralleled the public’s. In 2011, 87,000 Chinese passengers took cruises; in 2018, 2.4 million did so, making China the world’s second-largest cruising nation, after the US Several factors accounted for that enthusiasm. First, international travel is a novel experience for most Chinese, and cruising offers a relatively easy entry point. Second, cruises are well suited to group travel. That’s important to both the government and Chinese families. In the 1990s, the authorities developed a permitting system that allowed overseas travel only in groups and to approved destinations. Over time, the policy was loosened, but the tradition took hold. In 2018, 50% of all Chinese travelers went abroad in group tours.
Covid sank most Chinese travel, but it didn’t extinguish a desire for the lido deck. In 2020, the government allowed the resumption of inland cruises on the Yangtze River, which have proved popular among tourists with nowhere else to go. In the first half of this year, 2,083 cruises travelled the river, down only 17% from the same period in 2019. Ticket prices have surged roughly 30%, despite sporadic Covid outbreaks and lockdowns.
That bodes well for the restart of China’s broader cruise industry, including those ships — like the Zhao Shang Yidun — that travel China’s coasts. Indeed, over the recent National Day Holiday, duty-free purchases on Hainan, the tropical island province at which the ship will make brief stops, surged by 359% over 2019.

—Bloomberg