China’s travel activity and spending during the Lunar New Year holiday exceeded pre-pandemic levels, indicating an improvement in consumption in the world’s second-largest economy. The Ministry of Culture and Tourism reported a 34.3% increase in domestic trips and a 47.3% year-over-year increase in spending, with tourists spending nearly 632.7 billion yuan ($87.95 billion) on domestic holiday trips. The data also showed a 19% rise in domestic trips and a 7.7% increase in spending compared to the same period in 2019.
The increase in travel and spending comes at a time when Chinese policymakers are focused on boosting domestic consumption to counter deflationary pressures. The mainland saw 3.6 million tourist departures and 3.23 million tourist arrivals during the holidays, with mutual visa-free travel with certain countries contributing to the recovery in both outbound and inbound travel. The Lunar New Year is an important holiday in China and is often used as a measure of consumer sentiment in the country.
However, the sustainability of the increase in travel remains uncertain, as tourism revenue per trip is still below pre-pandemic levels. Analysts have cautioned against overinterpreting the data, noting that the high year-over-year growth rates are partly due to the low base from the previous year during the height of the Covid ‘exit wave’. Despite the positive data, the market remains cautious, with analysts urging investors to exercise caution.
Following the Lunar New Year holiday, China’s stocks rose, led by the tourism sector, as trading resumed after a week-long closure. Market participants are also monitoring potential stimulus measures from Chinese policymakers to support the economy and boost spending. The People’s Bank of China held a key policy rate steady, while investors are also watching for potential easing of U.S. monetary policy, which could impact China’s policy decisions.
The People’s Bank of China has been encouraging banks and local businesses to accept foreign bank cards and considering other measures to facilitate mobile payments for international visitors. The recovery in travel and spending during the Lunar New Year holiday is a positive sign for the Chinese economy, but caution is advised in interpreting the data, given the unique circumstances of the pandemic and the potential impact of global monetary policy decisions.
