[Analytics] Has influx of Chinese tourists benefitted Nepal economically?

A picture of an invoice containing mostly Chinese characters did quite some rounds on Twitter this morning. The invoice, according to Sumana Shrestha, a management consultant, who took its photo and posted it online, was provided by a Chinese restaurant in Thamel. She does not remember its name. The invoice probably would not have grabbed much attention had it not been for remarks written in English alongside a QR code. It said, “Please use Alipay and WeChat to scan the QR Code above. You can order dishes…”, The Himalayan Times reported.

This offers a glimpse into how Chinese mobile payment giants, Alipay and WeChat Pay, have made inroads into Nepal without taking permission from the authorities concerned.

“Use of WeChat Pay, rather than Alipay, is quite common in Nepal,” said a banker on condition of anonymity.

This, according to bankers and businesspersons, has prevented money spent by Chinese in Nepal from entering Nepal. “This has been reported to the central bank as well. But nothing has been done,” the banker said.

Like the banker, many business operators in Thamel voice concern about widespread use of Chinese payment applications in private. But they hesitate to speak out.

Alipay and WeChat Pay are mobile payment applications hugely popular in China. Alipay has around 700 million active monthly users in China, and WeChat Pay has over a billion.

These payment applications allow users to transfer payments from one account to another within the platform. So, if a Chinese tourist with a WeChat Pay account visits Nepal and stays at a hotel in Thamel owned by a Chinese, who also has a WeChat Pay account, the two can settle payments using the Chinese application. This effectively means payment for a service purchased in Nepal was paid in China because WeChat Pay is based in China.

This not only bars authorities here from enrolling spending made by Chinese tourists as foreign income but provides leeway to Chinese businesspersons to repatriate earnings without paying any taxes because the money technically never entered Nepal.

There is no official data on the number of businesses, such as hotels, restaurants and travel agencies, operated by Chinese in Nepal. But Jyatha area in Thamel has earned the moniker of mini-China because of the sheer number of businesses owned by the Chinese. Almost all of these business owners, according to many, have a WeChat Pay account and so do Chinese tourists visiting Nepal.

This raises question over economic benefits that Nepal has derived from influx of Chinese tourists, who are known as big spenders worldwide.

Nepal received 153,602 Chinese tourists in 2018, up 46.8 per cent compared to 2017. Nepal is planning to attract even more Chinese tourists in the Visit Nepal Year 2020, a government campaign that aims to attract two million foreign tourists.

But arrival of more Chinese tourists will not make any difference if what they spend in Nepal never enters the country. This is because money can only create economic impact if it passes around, from, say, restaurant owners to vegetable and meat suppliers to farmers and so on.

There’s a joke that explains the impact of movement of money on economy. A tourist, as the joke goes, visits a hotel, leaves $100 bill at the reception and goes to inspect rooms. The money is then used by the hotel owner to clear the debt at a meat shop. The meat shop owner then rushes to chicken supplier, whom he owes money. The chicken supplier then runs to the same hotel where he had stayed a few days ago but had not paid for the room. So, by the time the tourist returns to the reception to inform he does not like the room, the money he had left has come back to its original place. This is just a tongue-in-cheek remark, but it explains how the movement of money can keep the economy vibrant and robust.

Nepal definitely needs more tourists, including the Chinese, as tourism and travel industry is one of the major sources of foreign income. Nepal generated Rs 47.6 billion from foreign tourists in the first eight months of the current fiscal, which is Rs 13.6 billion less than the income generated from export of merchandise goods. This makes tourism an industry that can rapidly bring in foreign currency to address the problem of widening current account and balance of payments deficits, which are reducing the size of foreign exchange reserves.

“We have been notified about this problem. But we have not studied its severity yet,” said central bank Spokesperson Narayan Prasad Paudel.