China’s Golden Week holiday signals continued consumer caution

BEIJING — China’s Golden Week holiday affirmed a more cautious spending trend as consumers put more emphasis on experiences.

The seven-day public holiday that ended Monday saw about 2 percent less spending on domestic travel than pre-pandemic levels, according to Goldman Sachs analysis released Tuesday.

“Low per capita tourism spending and low service prices highlighted the still weak domestic demand and continued decline in consumption,” the analysts said.

The decline was an improvement from a more than 10 percent gap during spring break, Goldman’s report said.

China’s Golden Week holiday commemorates the founding of the People’s Republic of China on October 1. It is the last public holiday of the year for the country.

Nearly a fifth of Trip.com’s vacation bookings came from users ages 20 to 25, making them the top consumer group, the company said. He noted that more than 90 concerts were held during the holiday and that the daily increase in orders for shows and exhibitions increased by an average of more than 80% during the period.

However, the lack of blockbusters has led to a drop in box office earnings to 2.1 billion yuan ($300 million) this year from 2.7 billion yuan last year, according to media state, citing the China Film Administration.

Consumers were also more spontaneous.

Trip.com said nearly 30 percent of travelers booked same-day or day-before trips, up 6 percentage points from last year. The average number of days booked by customers in advance fell to 6 days this year, down from 6.8 days last year, the company said.

This year’s holiday followed a flurry of political announcements and promises and a stock market rally. Consumer spending in China has been weak since the pandemic due to uncertainty about future income and economic growth.

“People are becoming more cautious about spending. They are also opting for more accessible travel options and affordable locations,” Kenneth Chow, director at Oliver Wyman, told CNBC on Wednesday.

“People are much more interested in spending on things they can talk about, things they can post about (on social media), rather than the big ticket items,” he said. He said such changes mean brands, including luxury ones, need to focus more on communicating the benefits to potential Chinese consumers.

“When people become much more sophisticated, the proposition has to change, and whoever is able to adapt to this new trend first will be able to win,” Chow said. “It’s not just about Chinese brands. It’s not just about overseas brands. It’s about who will react first and who will capture the attention of Chinese consumers first.”

Christine Peng, head of consumer affairs for Greater China at UBS, pointed out on Wednesday that the Golden Week figures indicated that the recovery in spending was linked to exchange policies for home appliances.

Retail sales rose 9 percent over the holiday, while home appliance sales jumped 149.1 percent, according to state media, citing figures from the tax administration. He did not provide the amount spent.

“Golden Week consumption may still suggest a modest recovery from August, in our view, thanks to trade-in subsidies (for appliances and cars) and consumption vouchers issued by local governments,” Peng said. “For example, retail sales in Shanghai rose 3%, a rebound from -3% year-on-year in August.”

During Golden Week, mainland China recorded 765 million domestic trips, up from both the previous year and before the pandemic, according to the Ministry of Culture and Tourism.

However, another tally by the ministry showed China received 782 million domestic visits in 2019. It was not immediately clear whether the numbers were comparable.

The average number of mainland Chinese residents traveling across the border rose to 1.08 million per day during this year’s holiday, up from 1.01 million per day in 2019, according to CNBC calculations of official data.

Japan, Thailand and the UK were among the most popular destinations, according to booking site Trip.com.

Overseas transactions by Chinese Alipay users surged 60 percent in the first four days of the holiday compared to a year ago, according to the mobile payments operator, owned by Alibaba affiliate Ant Group.

Malaysia, Korea, Thailand, Hong Kong and Singapore were the top destinations for Chinese tourists after the increase in transaction volume, Alipay said. It noted that rather than shopping, Chinese travelers also spent significantly on entertainment, food and drink, services and transportation.

Foreign visitors to mainland China using Alipay spent more than twice as much in the first four days of the holiday compared to a year ago, the company said. China has introduced visa-free travel for several countries, while Alipay and WeChat Pay — the country’s two dominant mobile payment apps — have made it easier for foreigners to use the apps over the past two years.

Hong Kong said visitors from mainland China averaged 170,000 a day during the holiday, up 27 percent from a year ago. On October 1, Hong Kong said it had received 220,000 visitors from the mainland, the highest since the end of Covid-19 border controls.

Oliver Wyman’s Chow observed that hotels, particularly those in Hong Kong, were adapting to lower nightly rates by selling more food or other experiences.