China's Golden Week Consumption Boom: What Went Wrong?

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China's Golden Week holiday has come to an end, revealing disappointing figures in travel and spending. The data reflects a slower-than-anticipated recovery in consumption, adding to the current economic downturn.

From October 6 to the eight preceding days, mainland China witnessed a total of 826 million trips, marking a 4.1% increase compared to the corresponding period in 2019 when strict lockdowns and travel restrictions were imposed by Beijing due to the pandemic. Data released on Saturday by the Ministry of Culture and Tourism revealed that tourist spending in the country reached 753.43 billion yuan ($103 billion), experiencing a growth of 1.5% from the levels seen in 2019.

However, travel to and from mainland China also failed to meet expectations.

During the Golden Week holiday, the National Immigration Administration reported that an average of 1.48 million individuals crossed the border daily. This figure was 85.1% lower than the previous year's volume and below the body's earlier forecast of 1.58 million. Analysts from Goldman Sachs stated that the tourism data indicates a slowdown in the services recovery, though they acknowledged that progress towards recovery was still ongoing.

Passengers waiting for trains on October 6, 2023, the last day of the national holiday, at Shenyang North Railway Station in China's northeastern Liaoning province

Additional policy easing will be necessary to further revive consumption and services, particularly considering the ongoing property downturn and persistently low confidence levels.

Data from Alipay, the largest payment app in China with more than 700 million active monthly users, reveals that the usage of its payment services by outbound travelers was only 80% of the level in 2019. However, there has been a slight increase in average spending per person, reaching 105% of the 2019 level. In December, Chinese consumers emerged from three years of pandemic restrictions, and Beijing has been anticipating a surge in "revenge spending" to stimulate economic growth.

Tourism-focused businesses worldwide are eagerly awaiting the revival of Chinese tourists, who previously held the title for highest-spending travelers prior to the global health crisis. However, the revival of China's consumption sector has been lackluster in terms of pace.

This aerial photo taken on September 28, 2023 shows a housing complex by Chinese property developer Evergrande in Wuhan, in China's central Hubei province.

STR/AFP/Getty Images

China's real estate crisis is predicted to negatively impact the economy for an extended period.

According to Citi analysts, the subdued recovery in travel can be attributed to the fading effects of "pent-up demand," reduced spending capacity due to an economic slowdown, and shifts in travel trends.

Two emerging trends among younger travelers this holiday season are "reverse tourism," which involves visiting offbeat destinations, and incorporating visits to farmers markets into urban explorations. Citi analysts have observed that these trends reflect a desire for high-quality experiences rather than the conventional touristy activities surrounded by crowds.

The analysts added that visa issuance restrictions and the depreciation of the Chinese currency are likely to limit the demand for overseas travel, despite the steady resumption of group tours and increases in flight capacity.

This aerial photo taken on September 28, 2023 shows a housing complex by Chinese property developer Evergrande in Wuhan, in China's central Hubei province.

STR/AFP/Getty Images

China's economy will be hobbled for years by the real estate crisis

Weakness at the box office

Chinas box office hit multi-year lows during the holiday week.

During the break, movie ticket sales plummeted by 39% compared to 2019, reaching only 2.7 billion yuan ($370 million), as reported by Maoyan Entertainment, an online ticketing platform supported by Tencent. This figure represents the second-lowest box office performance in the last five years, with only 2022 surpassing it due to extensive Covid-related cinema closures.

The unexpectedly low earnings came after a summer season in which China's box office saw its highest ever numbers between June 1 and August 31. Numerous successful movies attracted a large audience of young, female movie enthusiasts.

According to Citi analysts, the underwhelming sales during Golden Week were mainly attributed to the lower-than-anticipated quality of movie content and the fact that a significant number of individuals were traveling instead of going to cinemas.

A recovery in domestic consumption not related to the Golden Week also fell short of expectations.

In Munich, Germany, on September 5, visitors admire the Cyberster electric car, manufactured by the Chinese car brand MG, at the IAA Mobility 2023 international motor show. The event, which takes place from September 5 to September 10, is being held at the Munich trade fair grounds and various other venues throughout the city.

China's electric vehicle market is witnessing a significant impact as domestic automakers capture global attention. New data revealed by the China Passenger Car Association suggests that Tesla's sales of China-made electric vehicles in September amounted to 74,073 units, indicating a decline of 10.9% compared to the previous year and a 12% drop from August figures.

According to data from the CPCA, among the total number of vehicles sold, approximately 44,000 were domestic sales, marking a 43% decrease from last year and a 32% decline from the previous month. In September, Tesla ranked as the second top-selling electric vehicle brand, coming in after BYD.

Overall, EV sales slowed in China last month, the CPCA said, with growth decelerating to 23% compared with a year earlier from 26% in August.