China’s seven-day-long National Day Golden Week has concluded, with retail sales and tourism data suggesting resilience in Chinese household consumption remains resilient. According to Xiaojia Zhi and Sylvia Sheng, analysts at Bank of America-Merrill Lynch, this suggests that the risk of a near-term growth hard landing is quite low, despite the continued sluggishness in industrial sector activities.
While retail spending over the golden week holiday grew by 11% compared to that seen in 2014, down on the 12.1% growth rate recorded between 2013 and 2014, Zhi and Sheng suggest that this may have been caused by capacity constraints at traditional domestic tourist sites and an increasing number of Chinese deciding to holiday abroad to avoid the crowds and shop for good value.
During this year’s golden week holiday, the number of tourists visiting China’s top 125 major attractions totalled 29.6 million, down 7.4% from 2014 after adjusting for the difference in the number of sites surveyed. This was likely caused by the China National Tourism
Administration (CNTA) setting the maximum capacity for each major site to ensure safety and service quality and many middle-class households choosing to travel overseas to avoid the crowds.
“To avoid crowds at traditional tourist sites, an increasing number of Chinese households spent time at farms, sports venues and cinemas,” the pair note.
“Box office sales at cinemas surged 70% YOY during the Golden Week, further up from 65.9% YOY growth in the four weeks ending 20 September. In comparison, the growth was 74% YOY during 2014 National Day Golden Week.”
Along with the impressive growth recorded in cinema visits, overseas travel jumped dramatically compared to levels seen in 2014.
“According to Goldpalm data cited by CNTA, overseas trips (excluding Hong Kong) increased by 36.6% YOY in 1-4 October,” Zhi and Sheng wrote.
“Japan, Korea and Thailand were the most popular overseas destinations, while the YOY growth of long-haul travels to US, Russia, France and Italy surged.”
The chart below reveals the explosive growth in overseas travel by Chinese nationals during the first 6 days of October. While travel to Hong Kong and Macau grew fractionally compared to 2014, it soared to other regional destinations such as Japan, Thailand and South Korea. Travel to Taiwan, not shown on the chart, also leapt by 20% to over 90,000 according to Taiwan Straight Tourism Association.
According to a report from the China Daily newspaper, around 400,000 tourists from the Chinese mainland visited Japan and spent nearly 100 billion yen, or around $830 million in shopping during the National Day holiday week. In the first six months of 2015 2.18 million Chinese tourists travelled to Japan, double the number seen during the same period from a year earlier.
While there has been plenty of doom and gloom of late surrounding the Chinese economy due to the continued slowing of traditional economic growth drivers such as industry and exports, the details of golden week expenditure and travel by Chinese households provide a timely reminder of the economic transition currently underway in the nation.
Services and consumption are now driving Chinese economic growth, albeit at a pace below that required to dispel fears over a hard landing for the economy. However, it is clear that Chinese households are continuing to consume at an incredible rate, not only at home but abroad. Even excluding travel for the golden week holiday, Chinese tourist numbers are surging worldwide.
In Australia, for example, Chinese inbound passenger arrivals totalled 953,200 in the 12 months to August, an increase of 156,100, or 20%, on the number recorded in the year to August 2014. That’s some hefty growth, particularly as Australia is not a cheap place to visit even after the recent depreciation in the Australian dollar.
It’s clear that Chinese households do not share the pessimistic view expressed by some analysts outside the nation, far from it. They’re spending up big and the numbers growing rapidly, not only in Australia but in China and elsewhere around the world. It speaks volumes for what is really happening in the economy. It’s doubtful that growth figures in travel and discretionary spending on items such as cinema attendance would be growing at such rapid rates if the Chinese economy is imploding.
The likelihood is that it’s not, it’s transitioning away from what it used to rely upon to power economic growth, and that process has only just begun. While no nations will not benefit from the slowdown in Chinese industrial activity, collectively, the world looks set to benefit from the the nation’s rapidly growing middle class.