China’s Golden Week spending drops to seven-year low as zero Covid hits economy

China's Golden Week spending drops to seven-year low as zero Covid hits economy
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Holiday spending during China’s Golden Week fell to a seven-year low overall. Covid borders while deterring people from traveling or spending, darkening economic outlook continues to undermine consumer confidence.

Tourist spending for a week’s vacation that began on October 1, fell 26 percent year on year to 287.2 billion yuan ($40.4 billion), according to figures from the Ministry of Culture and Tourism on Friday. This is the lowest figure since 2014 according to government statistics from previous years and is less than half the pre-pandemic level in 2019.

The National Day holiday is one of China’s longest public holidays and is usually the peak season for travel and spending.

This year, however, people have been discouraged from traveling due to the re-emergence of the virus and tight Covid restrictions. Quarantines and other control measures have intensified in recent weeks, including at some popular tourist destinations. Consumer sentiment has also been affected by mounting economic woes, mainly a result of Beijing’s continued zero-Covid policy and the deepening decline in the real estate market.

Tourists watch a paddy field painting at an agricultural demonstration area during the National Day holiday on October 2, 2022 in Harbin, Heilongjiang Province, China.

“With the soft package of holiday data, new Covid outbreaks ahead of the Party Congress, and tighter containment measures, it’s hardly a surprise,” Citi analysts said in a research report Sunday, citing this month’s meeting of China’s Communist Party elite in Beijing. leader Xi Jinping is expected to break tradition and be appointed to a third term of power.

China is the last major economy in the world to implement strict zero Covid measures aimed at eliminating chains of transmission through border restrictions, mass testing, extensive quarantines and uncompromising lockdowns.

The ruling Communist Party used the zero Covid strategy to argue that its political model was superior to Western democracies, and Xi threw his weight behind politics.

For local officials, doubling down on zero Covid is a way to keep up with the Party line, show their loyalty to Xi and prevent any large-scale epidemic that could jeopardize their careers weeks before the Party Congress.

In this month alone, the entire Xinjiang region, home to 22 million people, has banned all residents from leaving its borders, just weeks after a tight, prolonged lockdown began to relax restrictions. Last week, hundreds of tourists were stranded at an airport in southwestern Yunnan province after authorities imposed a sudden curfew.

As a result of the restrictions, some in China As people are tired of three years of Covid restrictions and choosing to stay home rather than risk unexpected lockdowns, they’ve begun calling this year’s holiday “the gloomiest Golden Week ever”.

According to the Ministry of Culture and Tourism, only 422 million trips were made on this year’s holiday, down 18% from last year. The number of trips was the lowest since 2014 and was far from recovering from pre-pandemic levels.

Airfare prices were the cheapest in five years, averaging 650 yuan ($91) per domestic trip, according to figures from Qunar, a Chinese online travel agency.

It wasn’t just travel that fell. Movie ticket revenue fell 66% year-on-year to 1.5 billion yuan ($211 million), making it the worst National Day week box office since 2016, according to the China Film Administration. That’s just a third of ticket revenue for the same period in 2019.

Since most of the broadcasts were propaganda or animation, the state media attributed this mainly to the lack of movie options. State-run “no blockbuster or imported movies,” he said. Southern Metropolis Daily.

New home sales in 21 key cities also fell 38% during Golden Week compared to the same period last year, according to China Real Estate Industry, a private research firm.

Analysts said all the weak data pointed to the heavy damage of Beijing’s zero Covid policy on consumer spending and the economy.

“The resurgence of Covid and the risk of curfew have particularly encouraged consumption and travel,” said Ken Cheung, forex strategist at Mizuho Bank Asia.

“Clearly, the zero-Covid policy is keeping the economy under pressure, and market participants are expecting the upcoming 20.

An aerial photograph taken on October 3, 2022 shows tourists touring a historical and cultural site in Rugao city, Jiangsu province, China.

Separately, a key private survey showed on Saturday that China’s massive service activity contracted in September for the first time in five months.

The Caixin Service Purchasing Managers Index, which focuses on small and medium-sized businesses in China’s service industry, fell from 55 in August to 49.3 last month, according to a statement by S&P Global Ratings. This was the first drop in the index since May. A reading below 50 indicates contraction.

Efforts to curb the spread of Covid-19 across China led to a new decline in service sector activity, disrupting business operations and restricting travel, the statement said.

In particular, employment continued to shrink. The employment gauge has been in contraction territory for the nine months in a row, hitting its lowest point since May.

According to government data, China’s service sector is a major source of employment, accounting for 48% of total jobs created. It also has the largest population of young people, mostly working in restaurants and other catering services.

“The market was much less optimistic,” said Wang Zhe, senior economist at Caixin Insight Group.

The survey also showed that companies’ expectations for their future operations recorded the lowest reading in six months and the second lowest since August 2020.

“Entrepreneurs’ concerns continued to stem from recurrent Covid outbreaks and the impact of related controls on the market,” Wang said. Said.

CNN’s Nectar Gan contributed to this report.

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