The Chinese economy failed to shine during Beijing’s Golden Week

Massive crowds, millions of train and plane tickets sold and a surge in tourism — that’s what happened in China in early October. The week-long holiday that begins on National Day (October 1) sparked optimism for the Chinese economy, but the numbers fell short of government projections. Despite the surge in consumer spending, domestic and foreign analysts believe that more needs to be done to reverse the economic slowdown.

A total of 826 million trips were made in China during what is known as Golden Week (September 29-October 6), the longest holiday period of the year due to the proximity of two national holidays: the Mid-Autumn Festival and the People’s Republic of China’s 74th anniversary. Data from the Ministry of Culture and Tourism indicate a rebound of 71.3% compared to last year when some pandemic-containment measures were still in effect. But it was only 4.1% better than 2019, the year before the pandemic.

Social media was flooded with photos of crowded tourist attractions like the Great Wall, Dunhuang (a city in northwestern China on the edge of the Gobi Desert) and busy shopping centers in Shanghai. State-owned news outlets trumpeted the 753 billion yuan ($103 billion) raked in by the tourism sector in just eight days as proof of the “prosperity” and “vigor” of the world’s second-largest economy. Consumer spending increased by 129.5% year-over-year, although it’s only a slight 1.5% more than in 2019. Despite being the most active period in five years for China, the actual numbers fell short of official forecasts that projected 900 million tourist trips generating 782.5 billion yuan ($107 billion).

Consumption remains stagnant

Stagnant consumption is a major concern for China’s leaders. Beijing hoped that consumer spending would drive economic growth in 2023 after it lifted the strict Covid-19 containment measures imposed in January 2020. However, frequent lockdowns prevented people from dining out, going to the movies and traveling. The longest holiday after China ended its zero-Covid policy presented the perfect opportunity for a surge in consumer spending. In a speech, President Xi Jinping emphasized the importance of boosting domestic demand. However, with income stability concerns in an uncertain job market (a youth unemployment rate exceeding 21%) and a disappointing summer for the economy, the Chinese people remain cautious.

“Considering the impact of inflation and the rise in tourist numbers, per capita spending during Golden Week was notably lower compared to 2019 levels. This observation indicates the somewhat delicate state of consumer confidence,” said an October 9 report by Trivium China, a policy research organization.

Dongwu Securities views the surge in travel during the October holidays as a positive indicator, but says it is not substantial enough to replace real estate spending. The real estate market represents approximately 25% of China’s GDP and has historically been a key driver of growth. However, it has experienced several months of decline and Dongwu highlighted the need for more aggressive debt reduction and additional relaxation measures in the real estate sector.

Home sales during this traditionally busy period for real estate have declined year-over-year and month-over-month. New construction purchases dropped by 17% compared to 2022, per data from 35 major cities analyzed by China Index Holdings. Existing house purchases decreased by 8%, according to China Real Estate Information Corporation (CRIC). Similarly, sales of new homes plummeted by an average of 31% daily compared to September, with existing home sales experiencing an even steeper decline of 84%, as reported by China Real Estate Information Corporation (CRIC).

The Chinese box office has had a disappointing fall season with unexpectedly low receipts following a record-breaking summer. During Golden Week, movie ticket sales dropped to 2.7 billion yuan ($378 million), a 39% decrease compared to 2019, according to Maoyan Entertainment. This marks the second-worst performance in the past five years, second only to 2022 when most theaters in the country were closed for months during the pandemic.

International travel slow to rebound

“80 million tourists have visited Xi’an during these holidays!” said a breathless WeChat post about the city that is home to the famous terracotta warriors. “But they’re all Chinese — no foreigners,” said the follow-up post. China is having a hard time reconnecting to the world after closing down for three years. In September, weekly passenger flights were only at 52% of the 2019 level, reported the Civil Aviation Administration.

Due to disrupted air connections, visa restrictions for Chinese citizens, and the depreciation of the yuan against the dollar and euro, international travel has not rebounded as expected. During the holiday week, a daily average of 1.48 million people crossed China’s borders, falling short of the estimated 1.58 million. This figure represents only 85.1% of the volume recorded in 2019 when Chinese tourists spent over $255 billion visiting other countries.

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