China’s Lunar New Year Boosts Economy with Surge in Consumer Spending and Travel
China’s Year of the Dragon kicked off with a significant increase in consumer spending and travel during the holiday period, providing a much-needed boost for the country’s struggling economy. The Ministry of Culture and Tourism reported a staggering 474 million domestic trips during the eight-day Lunar New Year festival, representing a 34% year-on-year increase and a 19% surge compared to pre-pandemic levels in 2019.
This year’s Chinese New Year was particularly crucial as it was the first in five years to be unaffected by the coronavirus pandemic or related restrictions. As a result, it served as an important barometer of consumer sentiment. Chinese policymakers are hopeful that domestic demand will help revitalize the sluggish economy, which has been grappling with a property crisis and weak investor confidence.
The Lunar New Year is often considered China’s equivalent of Christmas, with most companies and factories closed and popular tourist sites flooded with visitors. Tourists spent a staggering Rmb633 billion ($89 billion) during the holiday period, marking a 47% increase from the previous year and an 8% rise compared to 2019.
Shen Meng, the director at boutique investment bank Chanson & Co in Beijing, highlighted that this post-pandemic holiday came at a time of economic hardship for many, prompting them to open up their wallets and “release their stress.” He added, “People are also hoping the Year of the Dragon will bring a breakthrough for the economy.”
China’s statistics agency recently reported a significant year-on-year contraction for the consumer price index in January, while growth in retail sales has been sluggish for several months. Analysts at Jefferies estimated that although overall tourist spending increased during this year’s holiday, spending per tourist was down 9.5% compared to 2019 levels.
Qiu Jun, a teacher from Shenzhen who embarked on a five-night trip to Macau, Zhongshan, and Zhuhai, acknowledged the impact of the tough economy on her spending habits. She stated, “We haven’t bought things and can’t buy luxury goods,” noting that she used to be more relaxed in terms of purchasing and dining out.
Despite the economic challenges, travel and tourism have emerged as bright spots in China’s recovery. Trips to Singapore, Malaysia, and Thailand during the holiday period witnessed a 30% increase compared to 2019, according to the booking site Trip.com. Singapore and Malaysia have recently extended visa-free travel to most Chinese citizens, further facilitating the surge in tourism. Data from the culture ministry revealed that 3.6 million Chinese tourists traveled abroad, while 3.2 million travelers entered China during the spring festival.
Hong Kong, which hosted its HK$13 million ($1.7 million) harborside fireworks display for the first time since the start of the Covid-19 pandemic, welcomed 750,000 visitors during its four-day holiday period. Out of these visitors, 650,000 came from mainland China, surpassing the number of arrivals from China in 2018, according to the government.
The culture ministry also reported that China’s domestic box office for live performances generated nearly Rmb800 million during the holiday period, marking an 80% increase from the previous year. Jefferies estimated that ticket sales from silver screen movies amounted to Rmb5.7 billion during the five-day holiday period. One particular film that attracted movie-goers was “YOLO,” a self-help movie centered around an overweight woman who embarks on a journey of weight loss and self-discovery through boxing.
Overall, China’s Lunar New Year festivities provided a much-needed boost to the country’s economy. The surge in consumer spending and travel not only showcased positive consumer sentiment but also highlighted the resilience of the tourism industry in driving economic recovery. As China continues to navigate its way through economic challenges, the Year of the Dragon holds the promise of a breakthrough and renewed hope for the nation’s future.