The European Commission is looking to speed up and simplify the Schengen visa application process to 26 countries - which does not include the UK.
The move is expected to affect the UK tourism industry negatively with the loss of a greater number of high-spending Chinese tourists.
The Schengen area comprises of 26 European countries that have abolished passport or any other type of border control in-between their common borders. It functions as a single country for international travel purposes, with a common visa policy. The UK is not part of the area.
The European Commission earlier unveiled proposals to simplify visa process for foreigners visiting the area that include reducing the number of processing days to 10 from 15.
The proposals also include allowing online visa applications and a new touring visa with a tenure of up to one year. In addition, frequent travellers will be able to receive multiple-entry permits for up to three years.
With the move, it expects up to a 60% increase in the number of tourists to Schengen nations from China, India, Russia, Saudi Arabia, South Africa and the Ukraine. In addition, it expects a €130bn (£108bn, $179bn) boost to the Schengen economy over five years, with the addition of 1.3 million jobs in the tourism and related industries.
Meanwhile, UK companies fear that the proposed improvements would harm their business by driving more tourists into rival European countries.
They have long campaigned to update the UK's visa rules for foreign tourists, especially from China. Tourists from the second-largest and fast growing economy are the highest spending in the world, according to a study by the UN World Tourism Organisation.
In response, Chancellor George Osborne proposed a pilot programme that allows selected Chinese travel agents to apply for a UK visa using the Schengen form.
At present, an overwhelming majority of 82% Chinese visitors to Europe opt for Schengen visa, according to the UK China Visa Alliance, a lobbying group for the tourism industry.
"Europe is opening its doors to high spending Chinese visitors. Our European competitors understand that they bring wealth and investment. While the UK claims to be 'open for business' it makes it very hard and expensive for the Chinese to do business here. This is costing us jobs and growth," the Daily Telegraph quoted British Airways' parent, International Airlines Group, as saying.