Despite a surge in travel during the May Day holiday, spending remained subdued.Reuters
In communist China, Labor Day on May 1 is actually the beginning of a five-day holiday. During China's recent May Day holiday, there was a notable spike in travel, with millions of people taking advantage of the extended holiday. This increase in travelers can be seen as a positive sign of recovery from pandemic-era restrictions.
But despite the high number of travelers, there are underlying trends that undermine this good news. That's a serious concern about consumer spending patterns.
Let's dig into these trends specifically and explain why the numbers for this Labor Day holiday are disappointing despite high travel numbers.
Purpose of May Day Vacation
The five days of leave before and after Mayday are created by changing the working days.
As in previous years, Wednesday, May 1, 2024 will be a holiday in observance of Labor Day. We will be closed on May 4th and 5th due to the weekend. To confirm that May 2nd is a holiday, the previous weekend, which is Sunday, April 28th, was a business day. Similarly, the next weekend, May 3rd, which is his Saturday, May 11th, will be a working day.
The purpose of the change in working days is to give Chinese workers the opportunity to plan their vacations during the five-day holiday period and increase domestic consumer spending. The Chinese government had hoped to boost tourism and the economy by encouraging millions of households to travel during the holiday season.
This is what happened this year.
Rapid increase in tourism
According to a report by China's Ministry of Culture and Tourism, an astonishing 295 million people traveled within mainland China during this holiday, compared to the Labor Day period in 2019, which lasted just four days. Increased by 28%. Despite this surge in travel, the economic benefits were not as significant as expected. Tourism revenue this year reached 166.89 billion yuan ($23.6 billion), an increase of 13.5% from 2019, but shows that the increase in revenue is not commensurate with the increase in travel.
On May 1, 2024, fireworks will be set off over Victoria Harbor in Hong Kong, China, in time for Golden Week, the Chinese workers' holiday.File image/Reuters
decrease in spending
The average amount spent per trip has decreased significantly. According to CNN, tourists spent about 565.73 yuan (about $80) per trip, down 6% from five years ago.
Average spending has fallen even more sharply, according to Reuters estimates. According to the media, per capita spending during the holiday period fell by 11.5% compared to pre-coronavirus levels in 2019.
Immediately after China lifted COVID-19 restrictions, total spending increased by 12.7% from last year, but the decline in per capita spending indicates cautious consumer behavior.
Rather than flocking to bustling metropolises like Beijing or Shanghai, many travelers are opting for smaller tier 3 cities and lesser-known towns. This trend is primarily driven by cost considerations, as these destinations generally offer more affordable travel and accommodation options.
Reasons for decreasing spending
There are several reasons for this spending restraint. These reflect broader economic challenges within China, the world's second-largest economy. One of the key factors is the ongoing crisis in the real estate sector. Construction and real estate are major sources of employment and wealth creation in China. The sector's record recession has had a severe impact on household spending habits and has had a serious impact on consumer confidence.
Furthermore, job security is a major concern for many Chinese people. The economic slowdown has increased job uncertainty and consumers are hesitant to spend. This economic context is critical to understanding why spending has not recovered to expected levels despite the desire for travel freedom and experiences post-pandemic.
Consumer sentiment was further evidenced by a survey by the People's Bank of China, which found that less than one in four residents wanted to spend more, while they preferred to save in the first quarter of this year. It was found that the proportion of the urban population is increasing. The shift in consumer priorities from spending to saving highlights the pervasive economic uncertainty and its direct impact on consumer behavior.
Furthermore, the expansion of China's high-speed rail network and increased car ownership have made these remote areas more accessible.
Based on opinions from agents
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