Back From Abroad.(International Edition; SPECIAL REPORT: TRAVEL)

Byline: Duncan Hewitt

Encouraged by government subsidies, many Chinese travelers are seeing their own country for the first time.

Like many of China's newly wealthy middle class, Dai Xiaolang, a Shanghai housewife in her early 50s, has traveled abroad in recent years. She has joined tours to Russia and Thailand, and even gone with her family on a cruise to Vietnam and Singapore. But this year she's thinking of something a little closer to home: a trip to China's northwestern region of Xinjiang. "People say it's lovely in the summer," she says. "There's a lot to see. And if I go somewhere in China, it will cost me a lot less than if I go to America."

The Chinese tourist has become a ubiquitous sight from the Grand Canyon to the Grand Palais. Last year some 40 million Chinese travelers spent around $30 billion overseas, up 20 percent from the year before. And in the current downturn, many countries are still pinning their tourism hopes on China. The U.S. recently made it easier for Chinese travel groups to get visas, and representatives of various U.S. destinations have flocked to recent travel-industry fairs in Shanghai and Guangzhou. Mexico City is mulling visa-free access for Chinese visitors. Even war-ravaged Sri Lanka recently named China as the key to reviving its beleaguered travel industry. The fact that China's currency has strengthened against most others in recent months has only raised expectations for increased outbound travel.

But China has its own economic woes. Worried about slowing growth and falling exports, many Chinese are scaling back plans. Young Chinese, in particular, are delaying their overseas adventures. "In the past, a lot of students would go to Europe for a holiday after they graduated from university," says Hu Yang, an architect who helped set up a chain of youth hostels and budget hotels. "But this year it's not so easy to find a job. So now more young people want to wait until their life is more stable before going abroad."

As a result, Hu has seen business pick up at the properties she runs with some friends. Bookings at Shanghai's Naza Hostel and another on the popular Gulangyu Island in Xiamen are up 50 percent, thanks in part to Chinese business travelers who've downsized from mainstream hotel chains. But Hu says the tastes of young Chinese travelers are also changing, and they are seeking more relaxed and unique accommodations like Naza, which was ...