China tourism set for ‘new phase’ of strengthening in coming months, but will travellers tap into savings?
- Household savings in China increased by 17.4 per cent last year – the biggest increase since 2010, according to a new research note
- China Tourism Academy expects domestic tourists to take 4.55 billion trips this year, marking a huge increase from the zero-Covid ravaged 2022
With its restrictive zero-Covid policy in the rear-view mirror, China is expecting its tourism market to flourish this year, but analysts appear to be taking a less optimistic outlook for consumer spending in light of a massive swelling in household savings that has not been seen in more than a decade.
Domestic tourism revenue in 2023 could reach around 4 trillion yuan (US$582 billion), which would represent a year-on-year increase of around 95 per cent, recovering to around 71 per cent of what was spent in 2019, according to a forecast by the China Tourism Academy on Wednesday.
Meanwhile, the number of domestic trips taken this year is expected to reach 4.55 billion, which would be a year-on-year increase of 80 per cent from the 2.53 billion trips taken last year, according to the academy.
Meanwhile, the number of inbound and outbound trips could climb to more than 90 million, which would be nearly a third of the annual pre-pandemic total.
“It is expected that the tourism market will enter a new phase of expected strengthening in the second quarter, and the summer vacation season is expected to usher in a full recovery,” the report said.
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China’s big three airlines – China Eastern, China Southern, and Air China – appear to have already fully recovered, as they are now operating with more domestic seat capacity than they were in February 2019, according to monthly figures by travel data provider OAG.
However, despite the improved outlook for the tourism industry, analysts at Fitch Ratings expect the recovery in consumer demand to be patchy.
“Catering, offline retail and tourism-related services will be early beneficiaries as mobility recovered from late December,” the US ratings agency said last week.
Fitch analysts do expect a rebound in retail sales this year, but the recovery may be more volatile due to other factors such as shrinking household wealth amid a property slump, weak employment and rising household leverage.
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“A recovery in consumer spending is also likely to be more modest in China than [was seen] in other major economies in 2021, partly due to the absence of government stimulus packages. Still, households’ high balance of excess savings may drive catch-up consumption, presenting some upside for 2023,” Fitch Ratings said.
Property accounts for 59.1 per cent of total household assets in China, according to data from China’s central bank.
Meanwhile, household savings increased by 17.4 per cent in 2022, year on year – the quickest pace since 2010, according to a research note by Yuekai Securities last week.
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Household deposits increased by 17.84 trillion yuan, significantly higher than the respective increases of 9.7 trillion, 11.3 trillion and 9.9 trillion in 2019-2021, Yuekai Securities said.
The securities house said it expects consumption to recover from last year’s slump, led by the services sector. However, in view of uncertainties in economic prospects, savers are likely to leave some money behind.
Pointing to factors such as residents’ income growth and a greater unwillingness to consume, Yuekai said “consumption may still be below its potential, and further policy efforts will be required to boost it”.
President Xi Jinping has pledged to prioritise the recovery of domestic consumption and investment this year while increasing residents’ income, especially among low and middle-income groups, according to an article published last week by the Communist Party’s leading theoretical journal, Qiushi.
