It was an emotional affair for hundreds of millions of Chinese who travelled back to their hometowns, flew to popular tourist destinations or piled into shopping malls during the country’s long Lunar New Year holiday period, which began in late January. For some, this marked their first opportunity to travel in three years after pandemic related restrictions were finally lifted.
In some ways, the economic impact has been immediate. Tourism revenue during the Lunar New Year holiday jumped to 375.8 billion renminbi (US$55.2 billion, as of Feb. 13), about 73 per cent of such sales during a similar period in 2019. Box office sales were up 11.89 per cent from last year's Lunar New Year holiday. And China’s consumers are just warming up.
After effectively shelving ‘zero-Covid’ in December, policymakers quickly pivoted toward boosting growth and prioritising consumption. Just as pent-up consumer demand formed a large tailwind for the US and the Eurozone after their earlier lockdowns, it will play an important role in the post-Covid recovery in China - making this consumer-driven rebound an uncharacteristic one for an economy that has historically relied on government-backed spending, investment and goods exports to stimulate growth.
Trillions in new savings
For the potential scale of this ‘revenge spending’ demand, consider the huge amount of savings residents hoarded last year. Chinese households added a record 17.8 trillion renminbi (US$2.6 trillion, as of Feb. 13) to their bank deposits in 2022, up 80 per cent from a year earlier, according to data from the People’s Bank of China. As the winter’s sharp reopening wave of Covid infections recedes, life is gradually going back to normal. Following the holiday spending splurge, we expect to see a further rebound in categories such as home appliances, furniture and food & beverage.
