He also suggested a relook at the current government approach including talks with the Chinese tourism board and travel agents to address the lack of Chinese tourist arrivals to the State.
On the recent statement by Tourism Minister Datuk Seri Nazri Aziz in Parliament that 76 direct flights from Chinese cities to Kota Kinabalu were cancelled following the recent spate of abductions off Sabah's East Coast, Liaw said the State's tourism and hotel industry was badly affected.
"We have experienced an obvious (lack of Chinese tourists) situation that you can see in Kota Kinabalu. Actually they (Chinese) are having their holidays in China (from the second week of July to end of August) but now you can see around Kota Kinabalu that there are not so many Chinese tourists walking about."
Liaw said the hotels and apartments industry is also badly affected as a result.
"There are a lot of cancellations accounting for as much as 50 per cent of bookings for August from the China market. But for the Korean, Japanese or the European, Australian market there has been a slight increase."
Liaw said he had just returned from a familiarisation trip from China with local travel agents to visit the new route flown by AirAsia X to Xian, China where during he had met up with the Shanxi and Henan Tourism Boards.
"From the feedback received from them, it would seem the effects of the MH370 have already subsided. They have almost 'forgotten' about it (MH370).
This is because in between the period from the MH370 till now there have been a lot of events, so the attention of the Chinese has already been diverted.
"However they are now more concerned about the kidnapping case in Sabah.
The Chinese are emotional. They feel that if they come to the State they are not secure.
The latest news from Beijing is that they discouraged their travel agents to promote Sabah.
"So whatever Chinese travellers now coming to Sabah are actually independent travellers and not under travel agents. If you are talking about travel agents in China, from what I know they are still not encouraging (their tourists to travel to Sabah).
"Our industrial players and even government needs to take a serious look at the current situation. Perhaps we need to approach the travel agents in China to hold talks or familiarisation especially those travel agents who have been contributing tourists to Sabah in previous years.
"Maybe they should start to have interactions between these people first.
"I can see from the newspapers that the government is (currently) trying to avoid China and starting to focus on other markets which I don't think is a totally right (approach).
This is because when you consider that 40 per cent of tourist arrivals to Sabah are from China in the past, we should at least make the effort to approach them back.
"That way we at least 'give face' to them and in turn they will try their best to send more Chinese tourists here. If we do nothing then this situation will be prolonged and drag on until next year with no one knowing how long before it recovers."
Liaw said of course the effort to reach out can also be carried out by the private sector.
"The private sector of course will want to do sales and will always want to contact their China counterparts but it is more appropriate for the ministry (government) or organisations such as Matta or Satta to organise a whole team of industry players to meet the Chinese.
"With such an event being held in different regions of China together with Chinese media coverage, it is hoped the Chinese public will become aware about the event and it will lead to good sentiment from the Chinese public.
"If we take the initiative to approach the government and tourism industry there then the people there dare to take up (tours to Sabah.) As such I still think our government should not omit Chinese arrivals to the State which contribute substantially figure wise to the State."