A prolonged absence of Chinese visitors will impede the recovery of Southeast Asia's tourism-dependent economies, increasing the risk of financial and political volatility in the region. Since early in the COVID-19 pandemic, China has sought to prevent large-scale outbreaks by imposing swift lockdowns and movement restrictions in areas where infections are on the rise. This strict ''zero COVID'' policy, however, has made it difficult for Chinese citizens to travel domestically, let alone abroad — with China still imposing rules that other countries have long since lifted, like a mandatory two-week quarantine upon returning home from international trips. As a result, more Chinese citizens are staying at home, depriving nearby Southeast Asian countries of the tens of millions of Chinese tourists that once flocked to their popular tourist destinations each year. Beijing is highly unlikely to announce any domestic policy changes before the next Communist Party Congress in October, where President Xi Jinping is expected to be reelected for an unprecedented third term. And China's COVID-19 restrictions, in particular, could well last into next year as certain regions in the country continue to see resurgent outbreaks of the virus. The tourism-dependent economies of Southeast Asia — namely, the Philippines, Malaysia and Thailand — will thus likely be forced to contend with significantly fewer Chinese visitors (and less revenue) for the foreseeable future. 

• Earlier this summer, the U.S. ambassador to China said he expects Beijing to maintain its ''zero-COVID'' policy through early 2023. 
• Domestic travel in China for this year's Mid-Autumn Festival (Sept. 9-11) was down almost 17% compared with last year amid ongoing COVID-19 restrictions in the country. Spending over the holiday weekend, which often involves family gatherings, was also down 23% from 2021. The government has also heavily discouraged Chinese citizens from traveling abroad for the upcoming Golden Week holiday, which runs from Oct. 1-7. 

Chinese visitors are the lifeblood of Southeast Asia's tourism sector, and their continued absence will further hamper the region's economic recovery. The fallout from the COVID-19 pandemic (and in particular, China's ongoing travel restrictions) has hit Southeast Asian countries hard — particularly Thailand, the Philippines and Malaysia, where tourism previously generated a significant amount of both revenue and jobs. In 2021, Southeast Asian countries slowly started seeing the return of visitors from Singapore, Australia, South Korea and the United States amid the introduction of vaccines and the easing of COVID-19 restrictions in their home countries. But the number of Chinese tourists visiting the region — who previously far outspent and outnumbered those from elsewhere in the world — remains far below pre-pandemic levels. Only 4 million Chinese citizens traveled to Southeast Asia in 2020 — a steep drop from the 32 million who visited in 2019. And that stayed low through 2021 amid China's continued ''zero-COVID'' restrictions. For Thailand, the Philippines and Malaysia, this prolonged absence of Chinese travelers continue to stymy the post-pandemic recoveries of their crucial tourism sectors, despite the return of other international visitors. 

• In 2019, Thailand's tourism sector employed almost 20% of the country's labor force and generated roughly 18% of its GDP (or $98 billion), with Chinese tourists bringing in over half of that revenue ($50 billion). In 2021, Thailand generated only $6.4 billion in total tourism revenue and saw only 13,000 Chinese tourists visit the country the entire year (in 2019, the country welcomed 11 million Chinese tourists).
• In 2019, Malaysia's tourism sector accounted for roughly 6.7% of the country's GDP (or $24.4 billion), with Chinese tourists spending $2.2 billion of that total. But in 2021, Malaysia racked in a meager $53 million in tourism revenue and welcomed 176,000 Chinese tourists.
• In 2019, the Philippines' tourism sector officially employed about 13% of the country's labor force and generated roughly 12% of its GDP (or $9.3 billion), with Chinese tourists contributing $2.33 billion of that revenue. But in 2021, tourism generated less than 1% of the Philippines' GDP, with only 9,600 Chinese tourists visiting the country that year. 

The lack of tourism income will increase the risk of financial crises and social unrest in the region. The dearth of Chinese visitors in tourism-dependent Southeast Asian countries comes at a time when they are experiencing other economic problems, such as high food and energy prices. The lack of tourism revenue means the countries in the region will struggle to achieve the economic growth they had predicted in early 2022. As a result, governments will be forced to make difficult financial decisions. Governments may opt to continue high spending on subsidies in an effort to prevent social unrest. But this would come at the cost of worsening their fiscal deficits and potentially overburdening their budget, which could increase the risk of sovereign defaults by making it harder for governments to service their debt. On the other hand, governments could also scale back subsidies to maintain fiscal discipline, though this would come at the risk of inflaming social unrest. Spending cuts could also enable opposition politicians to rally support ahead of general elections by seizing on the anti-government anger amid the high consumer prices, potentially threatening policy continuity. This risk of political backlash is especially acute in Thailand and Malaysia, where the enactment of unpopular austerity measures could threaten to flip upcoming tight elections in both countries by bolstering support for opposition groups. 

• Thailand is projecting 5.3% inflation for 2022 compared with roughly 0.7% in 2019; the Philippines is projecting 4.9% inflation for 2022 compared with 2.4% in 2019; and Malaysia is projecting 2.8% inflation for 2022 compared with 0.66% in 2019. 
• Indonesia's fuel subsidy has tripled from the original budget to $33.8 billion, and the government was forced to raise fuel rates which resulted in widespread protests. Record fuel prices in Thailand, Malaysia and the Philippines will likely force the government to make similar choices in the coming weeks and months.