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Economists say China’s Golden Week holidays provide some relief to the world’s second-largest economy as it struggles to recover from the coronavirus pandemic, but policymakers must act to spur stronger growth.
Domestic tourist arrivals and income during the eight-day Mid-Autumn Festival and National Day holiday were slightly higher than pre-epidemic levels in 2019, Official data shows.
But analysts say a battered real estate market is at the heart of China’s economic woes, with activity remaining sluggish and fewer people than expected buying new homes spurred by holiday cheer.
With China’s third-quarter gross domestic product data expected to be released next week, analysts will be looking for signs that Beijing will continue to support the economic recovery with continued stimulus measures.
“The economy is resilient,” said Heron Lim, Greater China economist at Moody’s Analytics. “But in terms of strong growth, that’s still missing.”
China’s economy is expected to post a decisive rebound this year after the coronavirus lockdown in 2022, but a weak property market has dented consumer confidence, while lagging foreign demand for Chinese exports has also hit trade and manufacturing.
Policymakers responded by cutting mortgage requirements and interest rates but also implemented piecemeal stimulus measures to avoid adding to growing public debt.
State media hailed the Golden Week holiday as a success, noting the “bustling scenes” across the country as “the latest sign of…” . . China’s economy is recovering steadily, in sharp contrast to the dire predictions of Western media and politicians.”
But initial estimates for domestic tourism fell short of expectations. The Ministry of Culture and Tourism said that the number of domestic tourists during the holidays increased by 4.1% compared with 2019, and domestic tourism revenue increased by 1.5%. Goldman Sachs said that before the holidays, the government expected tourist numbers to grow by 7.8% and revenue to grow by 3.7%.
Per capita tourism revenue was 2% below 2019 levels, an improvement from negative 16% during the Dragon Boat Festival holiday in June. Box office revenue is also well below pre-pandemic levels.
In real estate, average daily sales by area fell 17% compared with 2022, according to China Index Holdings, which tracks 35 cities.
“Despite a raft of easing measures introduced in September, the real estate sector is showing signs of weakness again,” Nomura economists wrote in a research note, adding that the easing of buyer restrictions in China’s first-tier cities could come at the expense of demand. The cost is in smaller cities.
In Hong Kong, a popular destination for mainland tourists, the average daily number of cross-border tourists has reached 70% of what it was in 2017 and 2018, before COVID-19 and anti-government protests.
But analysts say mainland tourists spend less per capita on high-value luxury goods and services.
During holiday travel, tourists “now prefer to check in on social media rather than shop,” said Oliver Tong, head of Hong Kong retail at real estate services firm Jones Lang LaSalle. “Retailers have lost confidence in business prospects for the 2024 Lunar New Year.”
Ray Chui, chairman of Kam Kee Holdings, which operates more than 40 restaurants across the city, said holiday revenue was about 75% of 2018 levels.
“Now it’s more about getting the experience rather than spending money,” Cui said. In the past, tourists spent an average of up to HK$300 (US$38) per person, he said. “Now it’s about HK$80.”
In Macau, a gaming hub that relies heavily on mainland tourists, the number of tourists reached 932,000, with average daily arrivals about 84% of the same period in 2019, the Macau Tourism Bureau said.
JP Morgan analyst DS Kim said average daily gross gaming revenue during the holiday is expected to be 830 million patacas (US$103 million), an increase of nearly 30% from this year’s Labor Day holiday.
King said the numbers were “much better than we and the market had feared,” noting that mass-market gamblers were recovering more quickly.
Although the casinos have benefited, JLL said tourists are not splurging at the enclave’s jewelry stores and boutiques.
Analysts warned that signs of stability remained fragile given weakness in the real estate services sector, while rising interest rates in China’s trading partners would hit export demand.
Nomura Securities raised its 2023 gross domestic product forecast to 4.8% from 4.6%, but maintained its forecast for 3.9% the following year and its “cautious growth outlook.”
“We expect Beijing to take additional measures to stabilize growth in the near future,” analysts said.
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