This document analyzes the impact of China opening its tourism policy to allow Chinese tourists to travel to Taiwan in July 2008. It finds: 1) Using time series analysis, it finds Chinese tourists significantly reduced the number of international tourists to Taiwan from Japan and the US, showing evidence of crowding out, but not tourists from Hong Kong. 2) Even as Taiwan increased its tourism capacity, this crowding out effect occurred, indicating further opening the policy could enlarge the negative impact. 3) The results suggest Taiwan should either further boost its tourism capacity or slow its opening policy to Chinese tourists to avoid severe crowding out harming its overall tourism industry.