• 48°

Will a Direct Flight to China Boost the State Economy?

By DR. MIKE WALDEN

My first long distance trip outside my hometown of Cincinnati was to West Virginia by train.   Although my memory is fuzzy – this was in the 1950s – it wasn’t a luxury train. In fact, I don’t even remember a meal car. I don’t think I cared. I was mesmerized by watching the scenery go by – especially the hills and valleys of the “mountain state.”

Air travel has now replaced train travel as the most common mode of transportation for long distance trips. In 2017 there were a stunning 2.2 billion domestic air flights in the country.   Although many of us – including yours truly – often complain about ticket costs, delays and discomfort, we still prefer air travel for its speed and safety over long distance trips.

Now, something new may be coming to North Carolina in air travel. Something that many say could have a big, positive impact on our state’s economy. Local leaders and air flight experts are beginning discussions about the possibility of a direct – meaning nonstop – flight from RDU International Airport to an airport in China. Shanghai is a possibility, but there could be others in the mix.

Nonstop flights are the “crown jewels” of air travel. Not only are they usually shorter flights than those that make stops, but they also eliminate the time involved in changing planes, the time on the ground and the potential for delays and lost luggage that accompanies a stop.

Beyond convenience, how could a direct North Carolina to China flight help our state’s economy? There are three potential ways. Such a flight could help increase North Carolina exports to China. A direct flight could also increase Chinese investments in North Carolina, and a direct North Carolina to China flight would likely encourage more Chinese tourists to visit North Carolina.

Let me evaluate each of these possible impacts. China is the third most important country for North Carolina exports, exceeded only by Canada and Mexico. The latest annual data indicate North Carolina exports $3 billion of both products and services to China. Among the top product exports are a combination of agricultural goods (oilseeds, grains, pulp, meat) and technology products (semiconductors). It is estimated that exports to China support 28,000 jobs in the state.

A direct North Carolina to China flight wouldn’t necessarily mean more exports would be loaded on planes flying to China. Instead, a direct flight would give North Carolina businesses easier access to China for promoting North Carolina products and services and evaluating the Chinese market. This is important because China appears to be refocusing its economy by putting greater emphasis on household purchases of its rapidly expanding middle-class.

China is a big investor in the world, and it appears the country is shifting its portfolio away from financial investments – like stocks and bonds – to investments in companies. In North Carolina, China’s company investments have been diversified, including food (Smithfield), technology (Lenovo), transportation (rail cars and tire production) and many others. These Chinese investments in North Carolina based companies have created an estimated 15,000 jobs, more than in any other state.

China’s investments in companies in the U.S. are increasing by between $10 billion and $20 billion annually. China has had success with its North Carolina investments, and apparently likes the economic and business climate in the state.

The third potential economic impact from a nonstop flight between North Carolina and China could be the biggest of all. In 2001, only 12 million Chinese traveled the world as tourists. By 2016, the number of Chinese tourists had grown to 135 million tourists, and they spent $261 billion. The Chinese now make up the largest block of international tourists, and their numbers are expected to continue growing, rising to 200 million by 2020.

Tourists spend money and generate economic activity in the destinations they visit. Currently, Chinese tourists to the U.S stick mainly to the west coast, but research shows the initiation of direct flights can significantly increase tourism traffic.

Chinese tourists are said to prefer vacation sites with clean air and safe conditions. North Carolina certainly has these. Once reaching North Carolina, careful logistics would need to be developed to easily transport Chinese tourists to our beautiful beaches and mountains, cities and towns, golf courses and other sporting opportunities.

It’s hard to put an exact dollar value on what these three impacts from increased economic interaction with China could mean for the North Carolina economy. I wouldn’t be surprised if an increase in exports to China, a strengthening of Chinese investments in North Carolina and an expansion in the number of Chinese tourists could increase annual economic output in the state by $2 or $3 billion. This is as large as the textile and apparel industry.

Air travel today is as common as train travel was in the 1940s and 50s. Trains largely limited travel and economic interactions to within the country. Air flights have opened up travel and economic interactions to almost all parts of the world. Could a direct flight from North Carolina to China create new economic opportunities for our state? You decide!

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Walden is a William Neal Reynolds Distinguished Professor and Extension Economist in the Department of Agricultural and Resource Economics at North Carolina State University who teaches and writes on personal finance, economic outlook and public policy.

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