By Laura He, CNN Business
Holiday spending during China’s Golden Week has fallen to its lowest level in seven years as Covid discourages people from traveling or spending, while the darkening economic outlook further erodes consumer confidence.
Tourist spending on the week-long vacation, which began Oct. 1, fell 26% year on year to 287.2 billion yuan ($40.4 billion), according to figures from the Ministry of Culture and Tourism on Friday . That’s the lowest since 2014 and less than half of pre-pandemic levels in 2019, according to government statistics for previous years.
National Day is one of China’s longest public holidays and is usually a peak season for travel and spending.
But this year a resurgence of the virus and strict Covid restrictions have kept people from travelling. Lockdowns and other control measures have tightened in recent weeks, including in some popular tourist destinations. Consumer sentiment was also hit by mounting economic woes, largely due to Beijing’s ongoing zero-Covid policy and a deepening housing market slump.
“The soft package of furlough data is hardly a surprise with new Covid outbreaks and tighter containment measures ahead of the party congress,” Citi analysts said in a research report on Sunday, citing this month’s meeting of Communist Party elites in Beijing, at which Chinese Leader Xi Jinping is widely expected to break with tradition and be appointed to a third term.
China is the last major economy in the world still enforcing strict zero-Covid measures aimed at stamping out chains of transmission through border restrictions, mass testing, extensive quarantines and all-out lockdowns.
The ruling Communist Party has used the zero-Covid strategy to argue that its political model is superior to Western democracies, and Xi has thrown his weight behind politics.
For local officials, doubling down on zero-Covid is a way to stick to the party line, show their loyalty to Xi and prevent a large-scale outbreak that could jeopardize their careers weeks before the party convention.
This month alone, the entire Xinjiang region, home to 22 million people, banned all residents from leaving its borders, just weeks after it began easing restrictions from a strict, extended lockdown. While hundreds of tourists were stranded at an airport in the southwestern province of Yunnan last week after authorities imposed an immediate lockdown.
As a result of the restrictions, some in China have begun dubbing this year’s holiday season as “the somber Golden Week ever” as people tire of three years of Covid restrictions and instead choose to stay home rather than risk getting into unexpected lockdowns.
According to the Ministry of Culture and Tourism, only 422 million trips were made during this year’s holiday, down 18% from last year. The number of trips was the lowest since 2014 and far from recovering from pre-pandemic levels.
Airline ticket prices were the cheapest in five years, averaging 650 yuan ($91) per domestic trip, figures from Qunar, a Chinese online travel agency, showed.
And not only travel was declining. Movie ticket sales plummeted a massive 66% year-on-year to 1.5 billion yuan ($211 million), the worst box office for the National Day week since 2016, according to the China Film Administration. That’s just a third of box office revenue the same period in 2019.
State media have largely attributed this to a lack of film options, as most releases have been propaganda or animation. “There are no blockbusters or imported films,” said the state’s Southern Metropolis Daily.
According to China Real Estate Industry, a private research firm, new home sales during Golden Week fell 38% in 21 major cities compared to the same period last year.
All of the weak data points to the severe damage from Beijing’s zero-Covid policy on consumer spending and the economy, analysts said.
“The resurgence of Covid and the risk of lockdowns have particularly discouraged consumption and travel,” said Ken Cheung, chief Asian forex strategist at Mizuho Bank.
“Obviously, the zero-Covid policy has kept the economy under pressure and market participants will be checking any signals of policy changes after the leadership reshuffle at the upcoming 20th party congress,” he added.
Lockdowns hit services and employment
Separately, a key private survey on Saturday showed that China’s massive services activities fell in September for the first time in five months.
The Caixin Services Purchasing Managers’ Index, which focuses on small and medium-sized enterprises in China’s services industry, fell to 49.3 last month from 55 in August, according to a statement from S&P Global Ratings. It was the index’s first decline since May. A reading below 50 indicates a contraction.
Efforts to stem the spread of Covid across China prompted a renewed slowdown in service sector activity, disrupting business operations and restricting travel, the statement said.
Employment in particular continued to shrink. The employment indicator remained in contraction territory for the ninth straight month, hitting its lowest level since May.
China’s service sector is a major source of employment, accounting for 48% of all jobs created, according to government data. It also has the most busy youth, mostly in restaurants and other food services.
“The market was much less optimistic,” Wang Zhe, senior economist at Caixin Insight Group, said in the statement.
The survey also showed that business expectations for future activity hit their lowest level in six months and the second-lowest since August 2020.
“Entrepreneurs’ concerns continued to stem from recurring Covid outbreaks and the impact of related controls on the market,” Wang said.
CNN’s Nectar Gan contributed to this report.
The CNN Wire
™ & © 2022 Cable News Network, Inc., a Warner Bros. Discovery company. All rights reserved.