The May Day holiday marked the first long national holiday since China almost fully relaxed its Covid-19 lockdown measures. The consumption data for those five days paints a telling picture of the recovery of domestic demand.
In order to stimulate consumption, the authorities extended the holiday to five days, making long-distance trips easier for consumers. This, coupled with pent-up demand left over from the pandemic, drove a strong consumption rebound in various sectors, as reflected by multiple data sources, media reports, as well as my own personal experience.
First of all, a strong wave of “revenge travel” was seen in the tourism market, as expected. After staying put during the last long holiday, Lunar New Year, due to tightened restrictions to contain mini-outbreaks in certain parts of the country, consumers took full advantage of May Day to travel and make up for lost time – 16 months of it.
From what I saw both on social media and as a traveller myself, many cities experienced their biggest traffic jams since the beginning of the pandemic, as road travel surged.
Official data shows that domestic tourism has fully resumed to pre-pandemic levels. The Ministry of Culture and Tourism estimated that about 230 million trips were made by domestic tourists during the holiday. On a comparable basis, this is a 19.7 per cent jump from May Day in 2020, and 3.2 per cent higher than in 2019, before the pandemic.
Meanwhile, tourists are increasingly chasing quality services. According to online travel agency Ctrip, hotels with high star ratings accounted for nearly 40 per cent of the total bookings for the May Day holiday, while the number of private tours booked through the platform was 3.3 times higher than for May Day in 2019.
This reflects a continuous and long-term trend of consumer demand upgrades, uninterrupted by the pandemic.
For those who chose to stay close to home over the holiday, a trip to the cinema was a good option, particularly following the relaxation of social distancing measures. According to data from the China Film Administration, box office revenue reached 1.7 billion yuan (US$263 million) during the five days, breaking the previous record of 1.5 billion yuan in 2019.
Consumer goods sales also jumped. Many local governments accelerated the launch of shopping festivals, a trend that started during the pandemic last year to boost consumption.
In Shanghai, residents spent 12.8 billion yuan (US$1.9 billion) from April 30 to May 4, up 9.9 per cent when compared to the May Day holiday in 2019. From government data and media reports, it is evident that the same trend is at work in other major cities.
The most impressive sights may have been the long lines outside luxury stores in Shanghai’s high-end shopping malls. Wealthy shoppers haven’t had the chance to shop abroad as pandemic border control policies remain in place in China and most parts of the world, so demand is shifting to domestic stores.
Thanks to Hainan Island’s new status as a “free trade port”, sales of duty-free goods reached 485 million yuan during May 1-3, triple that of 2019.
Blockbuster consumption during the May Day holiday further confirms China’s economic recovery in recent months, and also augurs a sustained recovery through the rest of the year.
As China’s monetary and fiscal policies return to normal, investment may not contribute as much to the growth ahead as it did at the beginning of the economic recovery. Hence, consumption should play a critical role in supporting domestic demand.
That said, uncertainties still surround the near future, as the pandemic continues outside China: for example, India is being hit by a second wave. A survey by the People’s Bank of China in the first quarter showed that consumer confidence in future income was still lower than in 2019. On the other side of the coin, consumer propensity for saving is higher than before the pandemic.
Looking forward, progress in vaccination in China and around the world is the key to boosting consumer confidence in the near future. As vaccination continues and accelerates, China’s consumers may get a confidence boost as the year goes on. (Source: scmp.com)