China’s Golden Week offers economic bump but property ills persist

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China’s Golden Week holiday provided some relief for the world’s second-largest economy as it struggles to recover from the coronavirus pandemic but policymakers will have to take action to spur stronger growth, economists say.

Domestic tourism numbers and revenue during the eight-day holiday, which combined the mid-Autumn festival and National Day, were slightly higher than 2019 levels before the pandemic, official figures showed.

But activity in the stricken property market, which analysts say lies at the heart of China’s economic woes, remained lacklustre, with fewer people than expected inspired by the holiday cheer to buy a new home.

With China’s third-quarter gross domestic product data expected next week, analysts will be looking for signs that Beijing will continue to support the recovery with sustained stimulus measures.

“The economy is resilient,” said Heron Lim, greater China economist at Moody’s Analytics. “But in terms of strong growth, that is still missing.”

China’s economy was expected to rebound decisively this year after Covid lockdowns in 2022 but a weak property market has undermined consumer confidence, while lagging foreign demand for the country’s exports has hit trade and manufacturing.

Policymakers have responded with cuts to mortgage requirements and interest rates, but have implemented piecemeal stimulus measures in a bid to avoid adding to growing public debt.

State media lauded the Golden Week holiday as a success, noting “bustling scenes” across the country as “the latest sign of . . . China’s steady economic recovery, in stark contrast to the dire predictions made by western media and politicians”.

But initial estimates for domestic tourism fell short of forecasts. The Ministry of Culture and Tourism said the number of domestic travellers during the break was 4.1 per cent above 2019 levels, and domestic tourism revenue was 1.5 per cent higher. Prior to the holiday, the government had projected visitor numbers would rise 7.8 per cent and revenue 3.7 per cent, Goldman Sachs said.

Tourism revenue per head was 2 per cent below 2019 levels — an improvement from the minus 16 per cent recorded during the Dragon Boat public holiday in June. Box office revenue was also well below pre-pandemic levels.

In the real estate sector, average daily sales volumes by area fell 17 per cent compared with 2022, according to data from China Index Holdings, which tracks 35 cities.

“The property sector showed signs of weakening again, despite the raft of easing measures rolled out in September,” Nomura economists wrote in a research note, adding that the easing of buyer restrictions in China’s top-tier cities might come at the expense of demand in smaller cities.

In Hong Kong, a popular destination for mainland tourists, the daily average of visitors from across the border reached 70 per cent of comparable figures from 2017 and 2018, before Covid and anti-government protests rocked the territory.

But mainland visitors spent less per capita on high-value luxury goods and services, analysts said.

Tourists “now prefer social media check-ins over shopping” during holiday trips, according to Oliver Tong, head of retail in Hong Kong for real estate services firm JLL. “Retailers are losing their confidence in the business prospects of the Chinese new year in 2024.”

Ray Chui, chair of Kam Kee Holdings, which runs more than 40 restaurants across the city, said holiday revenue was about 75 per cent of 2018 levels.

“It is more about getting the experience than spending now,” Chui said. In the past tourists spent an average of up to HK$300 ($38) per person, he said. “Now it is around HK$80.”

In Macau, the gambling hub that relies heavily on mainland tourists, visitor numbers reached 932,000, with average daily arrivals hitting about 84 per cent of the equivalent figure for 2019, the city’s tourism authority said.

Average daily gross gaming revenue during the holiday was estimated at 830mn patacas ($103mn), up nearly 30 per cent from the Labour Day holiday this year, JPMorgan analyst DS Kim said.

The figures were “much better than we and the market had feared”, Kim said, pointing to a faster recovery of mass market gamblers.

While casinos benefited, JLL said visitors did not splash out at the enclave’s jewellers and boutiques.

Analysts warned that signs of stabilisation remained fragile given the weakness in the property services sectors, while elevated interest rates in China’s trading partners would hit demand for its exports.

Nomura raised its gross domestic product forecast for 2023 to 4.8 per cent from 4.6 per cent, but maintained a projection of 3.9 per cent for the following year and a “cautious growth outlook”.

“We expect Beijing will have to do more to stabilise growth in the near future,” analysts said.