Domestic travel over Golden Week boosts China’s economic recovery

Hundreds of millions of domestic tourists have boosted China’s economic recovery over its Golden Week national holiday, even as concerns linger over consumer spending.

There were 637m trips in China over the eight-day holiday this year, which drew to an end on Thursday, generating revenue of Rmb466.6bn ($69.5bn), data from the Ministry of Culture and Tourism showed.

The holiday is seen as an important barometer for consumer spending in the world’s second-largest economy. China’s third-quarter gross domestic product data, which will be released this month, will also be closely examined for signs of how other economies might recover from the pandemic.

While the figures reflected notably high volumes of internal travel at a time when other countries are struggling to tackle coronavirus, they remain well below last year’s total of 782m trips over a seven-day period.

Tourism revenue was also 30 per cent lower than over the same period last year, but the fall was much lower than over recent holidays in China, such as the Dragon Boat festival in June.

“It’s still way away from normal and it does underscore especially what people call social consumption, the kind of spending by households that requires them to go out . . . It’s by far the weakest link in the Chinese economy still,” said Louis Kuijs, head of Asia economics at Oxford Economics. 

China’s emergence from the pandemic has benefited from strong industrial growth and state support, but consumer activity has painted a mixed picture of the world’s most prominent economic recovery.

The wider economy returned to growth in the second quarter after a historic contraction at the start of the year. But data on retail sales of goods only edged back into growth territory in August after seven straight months of year-on-year decline.

Golden Week data nonetheless represented a big improvement on the Dragon Boat festival, when total visitors were about half of last year’s level and revenue was less than a third of the amount in 2019.

Economists at Citigroup said that while holiday consumption was “not yet fully normalised”, it was still significant compared with previous breaks. They added that virus containment “provided the basic public health conditions for holiday activities”.

Travel in China has been gradually eased over recent months, but some limits remain in place.

In July, the Ministry of Culture and Tourism loosened travel restrictions by allowing tourist companies to offer trips across provincial borders. Last month China increased the capacity of tourist sites to 75 per cent.

Mr Kuijs suggested that continued restrictions on international travel helped support economic recoveries in larger countries. “People are locked in their own countries, so it’s very much a domestic story,” he said. “Larger countries are less hampered by that lack of international interaction and international travel than smaller economies.”

Separately on Friday, Caixin China PMI Services data for September beat expectations to hit 54.8. A reading above 50 indicates expansion compared with the previous month.

Additional reporting by Robin Yu

Source Article