Domestic travelers spending less despite stimulus measures

Domestic travelers in China, including the Macau and Hong Kong SARs,are exhibiting a notable trend of reduced spending during the recent Golden Week holiday, despite the government’s various stimulus measures aimed at boosting the economy.

According to data from the Ministry of Culture and Tourism, while the number of trips taken during the week increased by 10.2% compared to pre-pandemic levels in 2019, overall spending rose only 7.9%. This discrepancy indicates a decline in per-trip expenditure of 2.1% from five years ago.

Nomura Banking Group has stated that it “firmly expects” the Chinese authorities to present a “fiscal stimulus package” soon, as the Ministry of Finance is set to hold a briefing on fiscal policy Oct. 12. Investors are eagerly awaiting additional measures to stimulate the world’s second-largest economy.

On Tuesday, the National Development and Reform Commission (NDRC) held a press conference that many anticipated would address economic policy measures relevant to Macau and Hong Kong. However, no such announcements were made, leading to a significant drop in Hong Kong stocks linked to Macau casino operators. The Hang Seng Index closed 9.4% lower, marking its largest fall since 2008.

Despite NDRC’s lack of concrete fiscal stimulus announcements, analysts from Nomura suggest that preventing stock market mania is crucial for successfully jump-starting China’s economy. The anticipated stimulus package may be capped at 3% of GDP per year, focusing on filling fiscal gaps faced by local governments.

“Low tourism spending per head and subdued services prices highlighted still weak domestic demand and continued consumption downgrading,” Goldman Sachs Group Inc. economists, including Lisheng Wang, said in a note. The average daily expenditure during the holiday was approximately RMB131 per trip, up from RMB113 during the Labor Day holiday earlier this year.

While retail sales during the National Day holiday rose 9% compared to last year, indicating some improvement in consumer sentiment, experts caution that sustained confidence remains uncertain. Michelle Lam, a Greater China economist at Société Générale, emphasized that a stable labor market and rising house prices are crucial for long-term recovery.

The government’s recent stimulus package, which includes interest rate cuts and cash handouts, has sparked some optimism in Chinese stocks but has yet to translate into consumer spending. Patterns observed during Golden Week may serve as indicators of consumer behavior and economic growth moving forward.

Nadia Shaw