Estimating tourism demand from China market to Malaysia

The arrivals of the Chinese people to Malaysia (Malaya) started since the early fifteenth century. At that time, they came as traders, seafarers and miners. The movements of Chinese people were very limited since at that time China was practicing a closed door policy with foreign countries. Thus, communications to and from China were very minimal. However, in 2001, the Chinese government had implemented an open door policy by participating in the World Trade Organization (WTO). The Chinese government had opened its economy to foreign investors through foreign direct investment by providing them various incentives. The beginning of 21^st century saw an increase in the inbound and outbound movements of the Chinese people. By 2005, China was among the top 5 most visited global destinations. Similarly, outbound Chinese also increased and Malaysia was among their most popular choice. In 1990, only about 107.6 thousand Chinese tourists visited Malaysia. By 2006, however, this figure had increased to about 457.8 thousand; which was the highest number of foreigners outside the ASEAN region. This research tries to identify and estimate the importance of major economic factors that influence the increase in Chinese arrivals to Malaysia. Among other factors that could induce their arrivals are tourism price, traveling costs, income and informal promotion. The Asian economic crisis and the outbreak of SARs also have been included in order to understand how the short-run shock affecting their demand for Malaysia. Cointegration technique of Vector Error Correction Model (ARDL) is utilized to statistically estimate the importance of these variables in this research.