Chinese tourism and travel agency regulation authorities have lifted restrictions on foreign ownership, capital startup investment and outbound bookings, effective today, making it possible for foreign travel management companies to own more than 51 percent of a Chinese travel agency and open up more branches. The new rules also significantly reduce entry capital requirements to operate at the Chinese point of sale.
FCm Travel Solutions was the first to publicly make a move. The Australia-based travel management company yesterday announced it has increased its ownership stake in its mainland China partner to 95 percent. FCm purchased its joint venture share of China Comfort Travel in 2004, which according to FCm was then the mainland's third-largest agency. The company now has offices in Beijing, Guangzhou and Shanghai.
The Chinese regulation changes are part of China's December 2001 approved accession agreement to the World Trade Organization, which first opened up Chinese travel agencies to foreign investment in 2002 and laid out plans for today's changes of wholly owned foreign agencies to operate on the mainland.
On March 18 of this year, the China National Tourism Administration and the Legislative Affairs Office released updated travel agency regulations that lifted the threshold on annual sales volumes for the establishment of a travel agency in China, which originally were included in the WTO agreement. The minimum capital required to start a travel agency now is 300,000 yuan ($44,000), down from 2.5 million yuan ($366,535).
China also removed a requirement for Chinese agencies to increase registered capital for every branch office. Previously, international tourism branches needed 750,000 yuan ($109,575) and domestic branches needed 150,000 yuan ($21,915). China also significantly reduced agency and branch operation guarantee bond requirements.
Chinese travel agencies now can engage in outbound travel bookings if the agency has operated for two years without infringement of the rules. Foreign-owned agencies still are prohibited from engaging in outbound booking activities except otherwise provided under the Closer Economic Partnership Arrangements—rules governing trade relations between mainland China and Hong Kong and Macao, its two Special Administrative Regions.
American Express Business Travel started the first TMC joint venture in mainland China in 2002 when it took a 49 percent share in China International Travel Services. Carlson Wagonlit Travel established its 51 percent-owned joint venture with China Air Services based in Beijing in 2003. BCD Travel has a joint venture arrangement with Shanghai Jebsen Air Service, which operates as BCD Travel China on the mainland. It is an extension of the joint venture between BCD Travel and Hong Kong-based Jebsen Travel Management, in which it owns a minority stake. In late 2007, Egencia launched its Chinese operations through parent company Expedia's local partner ELong, in which it has a majority stake
(BTNonline, Nov. 27, 2007).
HRG has a 51 percent ownership joint venture with mainland TMC Jin Jiang International Travel. "HRG was aware of the regulation amendment regarding shared ownership moving forward in China," a spokesperson said. "We are the majority shareholder in the JV and this works very well for HRG in the Chinese market. At the current time, we do not envisage any future changes to the ownership structure."