China’s Lunar New Year Travel and Spending Surges, Signaling Economic Recovery
China’s Lunar New Year holiday saw a significant surge in travel activity and spending, indicating a promising recovery for the country’s economy. According to data released by the Ministry of Culture and Tourism, there were 474 million domestic trips made during the eight-day festival, a 34.3% increase compared to the previous year. Additionally, tourists spent nearly 632.7 billion yuan ($87.95 billion) on domestic holiday trips, marking a 47.3% year-over-year jump.
The strong data is a positive sign for China’s economy, as policymakers have been striving to boost domestic consumption amidst deflationary pressures. The increase in travel and spending during the Lunar New Year holiday is seen as an important indicator of consumer appetite in the country. The fact that domestic trips represented a 19% rise over the same period in 2019, with spending rising by 7.7%, further emphasizes the recovery trend.
The recovery in both outbound and inbound travel was facilitated by mutual visa-free travel arrangements with certain countries. During the holidays, the Chinese mainland witnessed 3.6 million tourist departures and 3.23 million tourist arrivals, contributing to the overall growth in travel activity.
However, analysts at Nomura urge caution when interpreting the data, highlighting that the high year-over-year growth rates are partly due to the low base from last year when the pandemic had a significant impact on travel. They believe that while there is strength in the data, it is important to consider pent-up demand from consumers as this was the first Lunar New Year holiday unaffected by pandemic-related factors since 2019.
Despite the positive figures, there are concerns about the sustainability of this travel surge. Tourism revenue per trip still remains below pre-pandemic levels, indicating that there is still room for improvement. It remains to be seen whether this increase in travel and spending will continue in the long term.
The tourism sector in China experienced a boost following the Lunar New Year holiday, leading to a rise in Chinese stocks as trading resumed after a week-long closure. Market participants are also keeping an eye out for any additional stimulus measures from Chinese policymakers that could further support the economy and potentially boost spending throughout the year.
The People’s Bank of China recently held a key policy rate steady, while investors are reassessing when the U.S. Federal Reserve might start easing its monetary policy this year. The timing of rate cuts in the U.S. could impact Beijing’s policy decisions, as monetary easing in the U.S. is favorable for the yuan. The deputy governor of the People’s Bank of China, Zhang Qingsong, mentioned that the country has been encouraging banks and local businesses to accept foreign bank cards and is considering other measures to facilitate mobile payments for international visitors.
Overall, the surge in travel activity and spending during China’s Lunar New Year holiday is an encouraging sign for the country’s economy. While caution is advised when interpreting the data, it reflects the pent-up demand from consumers and the gradual recovery from the pandemic’s impact on travel. As policymakers continue to focus on boosting domestic consumption, further measures and developments are expected to support economic growth and sustain this positive trend.