Chinese Travelers Hit the Road but Pinch Their Pennies

HONG KONG—More Chinese travelers hit the road during the Lunar New Year holiday than ever before, but in a sign of postpandemic caution, many restricted themselves to shoestring budgets—a mixed signal as the world’s second-largest economy struggles to regain momentum.

Official data released Sunday showed Chinese tourists made 474 million domestic trips during the eight-day-long holiday, 19% more than in the same period in 2019, the last Lunar New Year before Covid-19 snarled travel for the next four holiday seasons. Tourism revenue was 7.7% higher than 2019 levels. The nation’s box office hit a new holiday-week record of about $1.1 billion, as more than 160 million moviegoers packed themselves into the country’s cinemas.

Still, economists say the strong travel data reflects little more than pent-up demand that will be difficult to sustain once satiated—as well as a long holiday that was one day longer than in years past. They also pointed to per-person spending that fell short of prepandemic levels.

Despite bringing some cheer to the country’s long-suffering travel industry, economists say that growth momentum is likely to sputter without more support from policymakers. Fresh data, also released on Sunday showed home sales tanking further across major cities in the first six weeks of the year when compared with a year earlier. Last year, direct investment by foreign firms rose by the smallest amount since at least 1998.

“The ongoing economic dip is likely to worsen into the spring,” Ting Lu, chief China economist at Nomura, warned clients on Monday, citing the housing sector and geopolitical tensions with the West.

One big question for China’s economy this year is whether it can find new sources of growth to fill the hole left by the continuing woes in the property sector, which once accounted for roughly one quarter of overall gross domestic product.

Economists have long been watching for signs that consumption might emerge as a durable growth driver after Beijing abandoned all Covid-related curbs in late 2022. But household confidence remains in the dumps and Beijing has refrained from extending direct support to consumers, for instance in the form of cash handouts, as other governments have done.

Travel data from the recent eight-day-long holiday, which ended on Saturday, offer hints of the shifting consumer mindset.

The 19% jump in domestic trips during the Lunar New Year from pre-Covid levels marked an improvement from the 4.1% increase seen during China’s weeklong National Day holiday in October last year. Total tourist revenue during the Lunar New Year was 633 billion yuan, equivalent to $88 billion, a 7.7% increase from 2019, according to data from China’s Ministry of Culture and Tourism. That was better than the 1.5% gain during the National Day.

Hotel sales on internet platforms during the eight-day-long holiday jumped more than 60% from last year, when China was only just emerging from its three years of strict Covid restrictions, data from the Ministry of Commerce show.

Some cities enjoyed a tourism boom. In Harbin, a city near the Russian border known for its ice festival, enjoyed an 82% surge in tourist visitors from a year earlier, to more than 10 million, while tourism revenues hit a record.

China’s movie industry also hit a new box office record, topping 8 billion yuan, while the 162 million moviegoers was 26% higher than a year ago, according to preliminary data from the National Film Administration.

Still, travelers appear to have grown more budget-conscious about their travels, a worrying signal for an economy facing deflationary pressures.

The average traveler spent 9.5% less than in 2019, a steeper decline compared with the 2.5% drop recorded during last year’s National Day holiday, a sign of “consumption downgrading,” economists from Goldman Sachs wrote Sunday.

Foot traffic at major shopping malls was 8% lower from a year earlier, according to Nomura calculations based on mobility data from Chinese technology giant Baidu—despite a low base of comparison as a wave of infections roiled the country after the scrapping of all curbs in early 2023. Apart from hotels and airfare, most consumer goods prices, including pork, remained weak, Nomura economists wrote.

Spending on Meituan, a popular food-delivery platform, rose 36% in the first six days of the holiday when compared with a year earlier. But that is likely because more families chose to order takeout instead of dining out, wrote Jian Chang, chief China economist at Barclays, who sees it as another sign of consumers paring back.

Then there is China’s housing market, already suffering through its sharpest slowdown in recent memory. New home sales across 30 large Chinese cities have declined by 23% so far this year compared with the same period in 2023, widening from December’s 16% year-over-year drop, according to calculations by Barclays’ Chang.

Separately, a Sunday release of balance of payments data for 2023 painted a grim picture of foreign investor confidence in China.

China’s State Administration of Foreign Exchange reported the smallest gain in annual foreign direct investment flowing into the country since the 1990s, underscoring capital outflow pressure and Beijing’s ongoing struggle to lure foreign capital amid icy relationship with the West.

China’s direct investment liabilities, a broad measure of FDI that includes foreign companies’ retained earnings in the country, rose by $33 billion in 2023, down 82% from 2022, according to the data.

This marks the smallest annual increase since 1998, according to Wind, a Chinese data provider, citing official figures.

Grace Zhu in Beijing contributed to this article.

Write to Stella Yifan Xie at [email protected]