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Still, the key reason for the decline in inbound tourism is the slipping national image of China, Liu says.

Foreign media focus on the country's pollution, wealth gap, corruption and public security problems, appear to have caused a change in their people's perception of China.

Cai Jiacheng, deputy director of the information center of the tourism administration, says high-priced but low-value tourism products that lack competitiveness are to blame for the sluggish trade. The websites of many tourism administrations and scenic spots are "impractical and poorly maintained".

The international financial crisis and RMB appreciation, are among the factors that contributed to the downturn trend in China's inbound tourism, says Zhu.

In an international study prior to its official launch earlier this month, the new think tank found that foreigners still have a keen interest in traveling to China, and there's a huge potential for growth in the number of inbound tourists. But the challenges remain.

For instance, many foreign tourists surveyed expressed a lack of desire to travel to China in the next three years citing various reasons. In addition, China's inbound tourism market faces competition from neighboring countries, such as Japan, which has witnessed significant growth of its inbound tourism market.

Liu is optimistic though. He believes China can expect a quadruple growth in inbound tourism in the future, considering the country's abundant tourism resources.