China is looking beyond Covid as tourist bookings for the Lunar New Year surge

BEIJING – People in China are overcoming the epidemic and going out to travel, preliminary data for the Lunar New Year holiday show.

“Ppent-up demand has been released as many people rush to scenic spots, watch fireworks displays, and gather at restaurants and hotels,” Nomura’s chief China economist, Ting Lu, said in a report Thursday.

He said the “exit wave” of Covid in China is ending quickly as official data shows a decline in infections, hospitalizations and deaths. “China has quickly reached Covid herd immunity, with the government estimating that about 80% of the population has already contracted Covid.”

The country saw a spike in Covid infections in December, just as Beijing ended nearly three years of strict contact tracing and border controls. The seven-day Lunar New Year, which officially began on Saturday, is the first major holiday since the end of Covid restrictions in China.

Within the country, bookings for bed and breakfast accommodations more than doubled from a year ago, while ticket sales for attractions grew more than fivefold, according to Data for the first four days of the Lunar New Year.

The travel booking site claimed that in those four days, bookings for hotels and other tourism activities exceeded levels seen in the same period in 2019, before the pandemic.

Travel vs expensive spending

It is not clear whether the increase in tourism indicates that consumption in China is on the way to recovering from the slump of the past three years. Retail sales fell 0.2% in 2022.

Domestic daily trips for the Lunar New Year holiday travel period so far — since Jan. 8 — have risen by about 50% from a year ago, according to the Transport Ministry.

The ministry said even tens of millions of daily trips were still sharply below 2019 levels.

“Mall traffic, new home purchases and auto sales data indicate that big-ticket consumption may remain subdued,” said Lou Nomura.

“Growth in passenger car retail sales by volume fell significantly to -21.0% year-on-year during January 1-15 from 3.0% in December, following the expiry of the seven-month 50% purchase tax cut,” he said in the report.

The propensity of Chinese households to save reached record levels last year amid uncertainty about future income and stagnation in the real estate market. The bulk of a family’s wealth in China is in real estate.

For people in China who plan to spend more in physical stores this year, supermarkets ranked highest, followed by convenience stores, according to an Oliver Wyman survey in December. Shopping malls ranked lowest.

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However, feelings can change quickly.

The study found that in just one week in late December, survey participants became significantly more comfortable going out.

“We think this is a very positive sign of resilience and how quickly consumer confidence is improving,” Oliver Wyman partner Emke Waters said in a phone interview earlier this month. Retail sales are directly related to consumer confidence.

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