Chinese consumers seem willing to spend money again after 3 years of economic uncertainty
Lunar New Year saw a 24% increase in travel in China
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BEIJING - During the Chinese New Year, more than 308 million tourist-related trips were made, according to the Chinese Ministry of Culture of Tourism, a nearly 24% increase compared to last year, generating $55 billion in the first six days of the holiday.
According to data released by Ctrip, one of China’s biggest online travel agencies, people in the country are also finding their way abroad. In total, bookings on the platform were four times higher compared with the year before, with overseas bookings increasing more than 640% year over year.
The numbers are linked to Beijing's lifting of mandatory quarantine restrictions for Chinese passport holders and a select group of foreigners, allowing people to travel relatively easily for the first time in nearly three years both in and outside the country.
Chinese President Xi Jinping is seen at the end of the Chinese Communist Party's 20th Party Congress on a giant screen a commercial district of Hangzhou in eastern China's Zhejiang province on Sunday, Oct 23, 2022. (Chinatopix via AP / AP Newsroom)
After years of economic uncertainty, an optimistic consumer sentiment seems to be on the way, according to McKinsey's 2023 China Consumer Report, subtitled "a time of resilience." The majority of the 6,700 respondents polled said they expect their household income to increase significantly in the next five years, with the middle class being the biggest beneficiary. An additional 49% of the respondents said that they believe the Chinese economy would rebound within a couple of months and grow at least as strongly as pre-COVID levels.
Consumer confidence and the revival of nonessential expenditures such as traveling are in line with China's recent decrease in the drop of domestic retail sales. Last November, a year-on-year decline of 5.8% was recorded and in December, right after pandemic restrictions were lifted, consumers quickly found their way back to the stores as retail sales only fell by 1.8% compared with the year before.
Official data from the first month of 2023 has yet to be released. Nonetheless, the first results from JD.com, one of China’s biggest e-commerce platforms seem promising, shows a 171% year-on-year increase in orders on Chinese New Year's Eve.
One example can be seen in Pingyao Ancient Town, a four-hour train ride away from the capital Beijing. Pingyao, once one of the financial capitals of China and home to the first modern bank in China, now serves as an open-air museum housing restaurants, hotels and shops.
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Tourists visit Pingyao Ancient Town in Pingyao County, north China's Shanxi Province, Sept. 19, 2015. The 2015 PIP kicked off in Pingyao on Sept. 19, showing some 17,827 photos by over 2,100 photographers around the world. (Xinhua/Zhan Yan via Getty Images / Getty Images)
"The past three years have been difficult. We barely receive any tourists, and without that, we don't have much to offer," a bar owner in the ancient city center said. Since travel restrictions have been lifted, tourists are gradually finding their way back; but for many entrepreneurs, it comes too late.
Although the main street is bustling with tourists, lights stay out in most establishments in the surrounding streets. "I think at least half of the tourism-related establishments went bankrupt," the bar owner, who withheld his name told FOX Business. "The only reason I could stay afloat was that my family helped me with my payments."
Pingyao's situation is indicative of many Chinese cities. While China's economy seems to stabilize, the crisis is far from over. The aftermath of years of limited mobility in people and goods is tremendous.
Many people have lost their jobs, and youth unemployment between the ages of 16 and 24 in urban areas remains sky-high. In addition, 2022's property crash evaporated hundreds of billions of dollars.
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Residents wearing masks line up to receive necessities donated by warm-hearted people in Xi'an, in northwestern China's Shaanxi Province, Jan. 10, 2022. (Tao Ming/Xinhua via AP / AP Newsroom)
Essential to economic recovery is an increase in consumer spending and investment. Additionally, although the first seems to move in the right direction, for a significant investment increase, the property sector needs to stabilize, Zong Liang, chief of research at the state-owned Bank of China recently told Reuters.
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During the Central Economic Work Conference, held last month, China's top officials came together to discuss the economic policy for the upcoming year. Chinese leaders have pledged to spur economic growth. What these specific measures entail is yet to be published. More details, including China's growth targets, are expected to be announced in the fall.