Chinese consumers traveled and spent less over the Golden Week holiday than the government had hoped, while lukewarm home sales stirred concerns about whether more support will be needed to bolster economic growth.
The nation recorded some 826 million domestic trips over the eight-day vacation period that concluded Friday, bringing in some 753.4 billion yuan ($103 billion) in revenue, official data showed.
State media celebrated the figures — a massive pickup from 2022, when the country was still contending with Covid-19 controls — as ones that showed “prosperity and vigor.” But the totals were only slightly better than in 2019 before the pandemic, while also undershooting official projections this year for nearly 900 million trips generating 782.5 billion yuan in sales.
“The National Day Golden Week tourism data suggest the services recovery has decelerated but continues,” economists at Goldman Sachs Group Inc. wrote in a Sunday research note. “We believe additional policy easing will be necessary for further recovery in consumption and services, especially given the continued property downturn and still-dampened confidence.”
The comparatively soft figures add to recent evidence that while some sectors are on the mend, the broader economy is still far from roaring back. Factory activity has stabilized though manufacturers don’t yet appear to have found solid footing. Home sales over Golden Week — a key time for property developers — declined from last year, raising doubts about Beijing’s ability to revive the market.
The CSI 300 Index — a benchmark of onshore Chinese stocks — dropped as much as 1.3% in its first trading session in more than a week before paring more than half of the losses. Travel and film stocks declined. Investors also have a lot to digest from the break aside from the spending data, as a Treasuries selloff roiled world markets and oil surged following Hamas’ surprise attacks on Israel over the weekend.
Modest Gains
There were signs that people were more willing to spend in major Chinese cities, suggesting some green shoots for activity.
Tourism revenue in Beijing rose nearly 22% from 2019, while the number of trips to the capital from non-residents surged around 13% from that year. Shanghai authorities, meanwhile, said the city’s tourism industry had “basically” returned to 2019 levels, according to state-run China National Radio.
But the national picture was much more subdued. Domestic trips and revenue made only modest gains as compared to 2019, recording single-digit percentage increases. Local movie box office sales fell 39% from pre-Covid levels to 2.7 billion yuan, according to data from ticketing platform Maoyan Entertainment.
The 2019 Golden Week lasted seven days, as the mid-Autumn festival did not coincide with the National Day celebrations, which this year boosted the length of the holiday by one day.
Citigroup Inc. economists noted some travel data was weaker than 2019 on an average daily basis — a trend they said could be due to several factors, including changing patterns among Chinese tourists.
“Reverse tourism to less explored destinations” among other trends have emerged, they wrote in a reserach note, “in pursuit of high-quality holiday experience and better lifestyle rather than traditional sightseeing with crowds of people.”
Ministry of Transportation data showed a bigger bump in road and waterway traffic as compared to railway and flight traffic, according to the Citi economists. That may be due to the increasing number of travelers who drive by themselves now as compared to before Covid.
The Goldman analysts also surmised that a “further increase in outbound trips may have reduced domestic tourism to some degree.”
While the rebound was not “too strong,” consumption remains a “relatively big” contributor to the economy, said Ding Shuang, chief economist for greater China and North Asia at Standard Chartered Plc. He saw reason for optimism in the Golden Week numbers, given the pre-pandemic comparisons were better than earlier long holiday seasons this year.
“The main risk to the economy remains from the property sector,” he said. “If the property downturn can slow, or just stop deteriorating, and consumption keeps its recovery momentum — it doesn’t even have to be too much stronger than in 2019 — there should be no problem to reach the annual growth target of around 5%.”
Property Support
In recent weeks authorities have rolled out various measures to help the economy and property in particular, including allowing the country’s biggest cities to ease home purchase curbs and encouraging banks to lower interest rates on existing mortgages.
“We still have not seen compelling evidence that these easing measures significantly boosted new property sales,” the Goldman economists wrote in a separate Sunday note. “Given the close link between property and consumption, we believe more policy efforts are needed to stabilize the property market and to facilitate further increases in consumer spending.”
What Bloomberg Economics Says ...
“Analysis of post-Covid spending trends and drivers reveals cause for concern – consumption may never return to its pre-pandemic path. Unless the government can instill more confidence in consumers, the economy will continue to suffer from a loss of power in a critical engine of growth.”
— Chang Shu and David Qu, economists
Read the full report here.
China is likely to introduce more measures to support the housing market over the next few quarters, including easing restrictions on home purchases and resales in more tier-1 and tier-2 cities, according to a Goldman report on Sunday.
The economists also floated options such as further reductions in downpayment ratios and mortgage rates, more public housing construction and additional financial support to secure the delivery of pre-sold new homes.
Ding of Standard Chartered, however, cautioned that the impact of steps introduced so far have been “mediocre.”
“The property market is still searching for the bottom. It’s impossible to encourage people to speculate on housing,” he said. “Demand in a few areas may improve, but in most places it’s hard to stimulate demand.”
--With assistance from Daniela Wei, Jane Pong, Alan Wong and Jinshan Hong.
(Updates throughout with additional numbers and context.)
