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  • Writer's pictureLeaf Digital

May holiday: A Surge in Travel with Cautious Spending

Updated: May 7

During China's May holiday, there was a noticeable increase in both domestic and international travel, reflecting a nation eager to reconnect and explore after prolonged periods of COVID-19 restrictions. According to official reports, nearly 8.47 million entry-exit trips were recorded, a 35.1 percent increase compared to the previous year. Similarly, outbound travel transactions through Alipay saw a 77% increase year-on-year, illustrating a renewed interest in international destinations.

Tourists made a total of 295 million trips within mainland China during the five-day-long holiday, which ended on Sunday, as stated by the Ministry of Culture and Tourism. This marked a 28% increase over the trip numbers from the Labor Day holiday in 2019, the last year before the COVID-19 travel bans, which lasted only four days.

However, this surge in travel did not translate into a proportional increase in spending, highlighting a cautious approach among consumers. Despite more people traveling, the total spending by outbound travelers increased by only 10% year-on-year. This restrained growth suggests that while the desire to travel is strong, economic caution prevails among consumers, likely influenced by ongoing uncertainties such as high youth unemployment and instability in the property market. Domestically, the trend of cautious spending is evident as well, with expenditures per capita still not reaching pre-pandemic levels despite increased travel activity. This behavior might be driven by broader economic concerns, impacting consumer confidence and spending habits. Thus, while travel restrictions have lifted, economic challenges remain a significant influence on how consumers choose to spend during holidays.

Chinese woman posing in front of the forbidden city

Underlying Challenges Impacting Consumer Spending

The May holiday offers critical insight into the nuanced economic landscape shaping consumer spending. Despite an uptick in travel, spending has not rebounded to pre-pandemic levels, underpinned by key economic challenges. High youth unemployment stands out as a significant factor. Many young adults, typically enthusiastic consumers of travel and leisure, face job scarcity which sharply curtails their spending capabilities. This demographic, crucial for driving market trends, thus exhibits restrained purchasing behavior due to insecurity about their financial futures.

Meanwhile, the property market, which has historically been a bastion of consumer confidence and economic stability, is faltering. As property values stagnate or decline, so too does the net worth of countless Chinese families, leading to a more cautious expenditure pattern. This reticence is particularly evident in discretionary spending, which includes travel and holiday-related outlays.

Additionally, deflationary pressures are causing consumers to delay purchases in anticipation of lower prices ahead. This wait-and-see approach affects not only day-to-day consumer goods but also larger investments and spending on services related to travel and holidays.

These economic elements create a backdrop of caution and conservatism. This context is crucial for understanding why, despite greater freedom to travel, many in China choose to hold back on spending, reflecting deeper concerns about the overall economic trajectory.

Impact of "Tiaoxiu" Policy and Labor Concerns

The "Tiaoxiu" policy, a practice where regular workdays are shifted to weekends to extend public holidays, has led to significant discontent among Chinese workers. This policy, intended to encourage more extended holiday periods and thereby increase leisure spending, often results in workers having only one actual day off—the rest are compensated by working additional weekends. This adjustment has exacerbated feelings of exhaustion among employees who feel they are sacrificing personal rest for no real gain in leisure time. Consequently, many workers are reluctant to spend during what little genuine free time they have, dampening the holiday's economic impact. This widespread dissatisfaction challenges the effectiveness of the "Tiaoxiu" policy, highlighting a crucial gap between the intended boost to consumer spending and the actual adverse effect on worker morale and spending behavior.

Sector-Specific Insights: Selective Consumer Patterns

Despite a surge in travel during China's May holiday, the expected boost in sectors like tourism, hospitality, and retail was uneven. In the hospitality sector, even though more visitors checked into hotels, the overall spending didn't rise proportionately, suggesting that travelers opted for budget-friendly options. Similarly, while restaurants saw more customers, the average expenditure per diner remained lower than anticipated.

The retail sector, particularly cinemas, also did not see a corresponding increase in revenue despite higher traffic. This indicates that consumers, while eager to travel and engage in some activities, were selective in their spending, prioritizing essential and value-for-money purchases over discretionary spending. This trend underscores a cautious approach to expenditure, with consumers focusing on essentials despite increased mobility.

Regional Variations and Preferences

During the holiday, travel patterns across China revealed distinct regional variations in tourist attractions, with varying levels of visitor engagement observed across different areas. While urban centers traditionally popular with tourists maintained steady traffic, there was a significant shift toward rural and niche destinations. This trend reflects a growing interest in unique and potentially more cost-effective travel experiences. Travelers increasingly explored lesser-known locales such as third- and fourth-tier cities—places like Yili in Xinjiang, Tianshui in Gansu, and Wuzhong in Ningxia—which offered not only natural beauty and cultural authenticity but also affordability. The rise in rural tourism underscores a broader shift in travel preferences, possibly driven by the desire for less crowded, more immersive experiences that align with tighter travel budgets.

Low budget preferences 

Complementing the shift towards lesser-known regions was a marked preference for more budget-conscious travel choices. Many travelers opted for transportation by car or train, serving as more economical alternatives to air travel. This trend was likely influenced by both cost considerations and the increasing convenience and efficiency of China's rail and road infrastructure. In urban areas, the popularity of free walking tours surged, reflecting a preference for low-cost, flexible sightseeing options over more expensive, structured guided tours and luxury shopping excursions. These economical and self-directed activities highlight a broader trend of frugality among consumers, who are carefully choosing how and where to spend their money amidst ongoing economic pressures. This strategic approach to travel underscores a shift towards value-driven experiences, indicating a nuanced adaptation to the current economic climate.

Train on a train station in China

Future Outlook and Government Goals

As China navigates its post-pandemic recovery, the government has set ambitious economic growth targets, aiming for an approximate 5% increase in GDP for 2024. Achieving this goal in a landscape marked by cautious consumer spending and varied economic pressures will require focused and effective policy interventions. The resurgence in travel and the shifting preferences towards more economical leisure activities suggest that while mobility has returned, the willingness to spend robustly has not. This indicates a need for measures that can boost consumer confidence and enhance disposable incomes.

The effectiveness of these measures will hinge on their ability to not just increase the quantity of money available to consumers but also the confidence they have in their economic future. As China's government looks to 2024 and beyond, balancing these short-term stimuli with long-term economic reforms will be crucial for sustaining growth and achieving its ambitious targets. This strategic approach will not only help stabilize the current economic landscape but also pave the way for a robust and resilient consumer economy.

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