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1 quarterly market report CHINA April - June 2007 Market Highlights # of outbound visitors: million in st/2nd quarter 2008 not available % change from previous quarter: 18.63% up over 2006 # of visitors to Canada: January April 2008 % change from previous quarter: 13.7% over same period 2007 Comments / Other information: Outbound travel overall is expected to increase 10% in Estimates for first half of 2008 are 21.6 million outbound tourists representing a 12.4% increase over same period in 2007 according to China's Youth Daily Air Capacity No changes in air capacity in second quarter 2008 China/Canada Economic / Political Environment GDP growth: 10.6% growth in first quarter 2008 over same period 2007 Error! Reference source not found. 1

2 forecasted economic growth: unemployment rate: 3.9% inflation: 9.8% in 2008 according to World bank forecasts see CPI consumer price index: 8.3 % in April 2008 exchange rate: June CAD = 7.11 RMB June CAD 6.78 RMB net national disposable income: Retail spending increased to 22 % in April net 13% after inflation Comments / Other information Chinese economy continues to show strong growth- but inflationary pressures are causing Government concern along with the continuing gap in income growth between urban and rural dwellers Emerging Tourism Trends Thailand, Japan, Singapore, Malaysia and Australia were the top overseas tourism destinations in Australia recorded 34% increase in visitor numbers in April 2008 versus the same month for Figures boosted by a MICE group 7000 Amway representaties. Overall, Australia, one of Canada's major long haul competitors showed growth in first 4 months of 2008 of 11% ( Canada, a non ADS country recorded 13. 7% growth for the same period ) May Golden Week changed to a 3 day holiday impacted outbound travel to long haul destinations First ADS groups to USA departed in mid June Government announced direct charter flights from Mainland China to Taiwan effective July '08 The devastating earthquake in Sechuan Province on 12 May 2008 which killed people is having a major impact on overseas travel. This particularly effects Government delegations and groups that have been advised to limit 2 Quarterly Market Report

3 their travel. This will likely continue for the foreseeable future Due to protests during the Olympic Torch relay in Paris - Government authorities are discouraging agents from selling and marketing tours to France. There was a 70% drop in visiotrs to France in June Although not officially sanctioned- due mix of ADS and non ADS countries - tours to USA incorporating Canada are selling well Market Development Activities See below in CTC activities CTC Activities Trade Development Fam Tours 12 agents to RVC and post show tours Supported agent MLI site inspection tour in conjunction with focus on high school education market segment Hangzhou OTC - first MICE tour to Canada - supported site inspection group to BC and Alberta. Group of 110 travelled in June BCCP tourism week - June 02- June 05 - due earthquake, a number of major activities were cancelled or postponed. Did complete 3 days training for 180 Beijing operational and sales staff in conjunction with partners - BC/Alberta/Ontario and Quebec Showcase Canada in Macau - 09 June-12 June - 51 Canadian organizations and 80 delegates matched with 53 Chinese agencies from across China in 3 days of Business-to-Business meetings. Main sponsores- BC/Alberta/Ontario.Quebec/Air Canada/Westjet Error! Reference source not found. 3

4 On-line Canada Specialist Programme introductory training module launched 04 June -to date 132 agents have signed up. China is the test-market for this new tool, which will launch globally in October 2008 Canadian Embassy launched new Visa Application Centres in Beijing, Shanghai, Guanzhou and Chonqing - which provide 5 day a week visa acceptance service at a fee of RMB250. These centres provide enhanced service levels and will be extended to other cities over next 12 months. This facility is available for both travel agents and the general public We are developing new trade e newsletters for distribution in 3 rd quarter Consumer Development Soft Launch of Perfect Family initiative continues through SOHU.com/travel - but final launch postponed from 02 June to September due earthquake Visitor numbers to BCCP (BC Canada House) is disappointing. The distribution of Pure Canada magazine through this centre is presently slow with less than 7000 in first month DFAIT Educational and Canadian cuisine promotions are occuring at BC Canada House, supported by the CTC Media Most media activities from mid May and June were cancelled due earthquake and the saturation of media coverage of the disaster and recovery efforts Joint CTC/BC/Alberta/Ontario and Quebec/Montreal e-news letter to media to be launched in 3 rd quarter In early May - Perfect Family celebrities travelled to Canada accompanied by selected media to film in BC Rose Wedding project to Ontario and media promotion postponed to September Public Relations Tourisme Quebec/Tourisme Montreal signed retainer contract with Ruder Finn. 4 Quarterly Market Report

5 Now all 4 key (meaning presently highly active in China) Provinces are with this agency along with CTC to provide unique opportunities to coordinate all media and PR activities Competitive Environment USA heavily promoting and advertising now they have ADS status with an excellent response from trade, media and consumer. The first phase of the ADS agreement with the US lasts for 6 months and targets residents of Beijing, Tianjin, Shanghai, Herbei, Hubei, Hunan, Jiangsu, Zhejiang and Guandong provinces India opened a tourism ofice in Beijing in April and is engaging in number of promotional activities to trade and consumers Effective July- Chinese and South Korean citizens will travel visa free between the 2 countries UK visas can be obtained on line effective May 2008 Hainan Airlines announced 4 flights a week service to Seattle from Beijing effective 06 June - 36J/186Y seats - Airbus 330 Oasis Airlines suspended all services in April 2008 including their Hong Kong/Vancouver route Future Outlook AC capacity reduction over 2007 effective July ( losing 1 Beijing/Vancouver daily flight) plus impact of earthquake on Government travel will provide challenges in 3 rd Quarter The Beijing Summer Olympics is likely to result in less outbound travel during August 2008 Continuing lack of ADS is preventing Canada competing effectively against other major long haul competitors Error! Reference source not found. 5

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