Key Takeaways:
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Holiday spending rose 7.9% despite 10.2% more trips than 2019.
Stimulus improved sentiment but didn’t boost per-trip spending.
Stronger fiscal policies could sustain fragile consumer confidence.
What Happened?
Chinese tourists spent less during their recent holiday than before the pandemic, despite making 10.2% more trips compared to 2019. Spending increased by only 7.9%, revealing a 2.1% drop in per-trip expenditure from five years ago.
The average daily spending rose to 131 yuan ($18.6) per trip, up from May’s 113 yuan during the Labor Day holiday. Retail sales during the National Day holiday saw a 9% rise from last year, and cross-region trips increased by 3.9%.
Mainland visitors to Hong Kong also surged, with a daily average of 170,000, a 27% increase from 2023.
Why It Matters?
This spending pattern indicates that China’s recent stimulus measures have yet to fully reignite consumer confidence. While the government introduced interest-rate cuts and cash handouts, these efforts lacked strong fiscal support to address unemployment and stabilize the property market.
Goldman Sachs economists noted weak domestic demand and downgraded consumption, highlighting the need for more decisive actions. Michelle Lam from Societe Generale stressed the importance of labor market recovery and stable house prices to sustain consumer sentiment.
What’s Next?
To nurture the fragile improvement in consumer confidence, stronger fiscal policies are essential. Duncan Wrigley of Pantheon Macroeconomics emphasized the need for consistent fiscal support to prevent consumption from fading post-holidays.
While the recent stimulus sparked a stock market rally, investors remain cautious about its sustainability. Policymakers aim for a sustainable bull market, not a repeat of past volatility. Monitoring the government’s next steps in fiscal policy will be crucial for investors and the market’s future trajectory.
