Chinese shoppers spend big during the Golden Week holidays — a sign consumption is on the mend

BEIJING – Chinese tourists shopped more in their home country during the latest “Golden Week” holiday, as the coronavirus pandemic kept millions from traveling overseas.

From Oct. 1 to 8, duty-free sales in the tropical island province of Hainan more than doubled from last year — soaring by nearly 150% — to 1.04 billion yuan ($155 million), according to the local customs agency. Tourist visits rose more than 40% to 146,800, the agency added.

Chinese shoppers also bought more foreign goods online. Total sales on Tmall Global, Alibaba‘s primary e-commerce platform for overseas brands looking to reach China, rose by 79% during the first seven days of the month compared to a year ago, according to the company, which did not disclose a monetary figure.

China’s Ministry of Commerce said average daily sales for retail and food and beverages was 4.9% higher than last year’s Golden Week holidays, for total sales of 1.6 trillion yuan from Oct. 1 to 8.

This year, the week-long holidays included both the celebration of the traditional Mid-Autumn Festival and the commemoration of the founding of the People’s Republic of China in 1949. It is the last public holiday of the year for a country in which most workers have few personal vacation days.

The data shows consumers in the world’s second-largest economy clearly still have cash to spend, even if China as a whole is still recovering from the economic shock of the coronavirus pandemic. In the first half of last year, official reports said Chinese tourists spent $127.5 billion overseas.

Most Chinese tourists come from China’s middle class, who are less affected than low-income groups by the pandemic and are now spending a lot on luxury products, said Jianguang Shen, chief economist at JD Digits, which was spun off from Chinese e-commerce company JD.com. He was formerly the chief economist at Mizuho Securities Asia.

The growth in domestic demand is contributing to rising prices for many products, such as hotel stays, kitchen appliances, musical instruments and car accessories, he said. “The price increase is very obvious,” Shen said in Mandarin, according to a CNBC translation.

Trip.com, whose brands include travel booking site Ctrip, said that the gross merchandise value (GMV) of hotel bookings more than doubled in October from a month ago, with four-star and five-star hotels accounting for nearly half of reservations. More people also chose longer vacations — the number of hotel guests staying for seven straight days during Golden Week rose by 70% from a month ago.

“It’s clear that consumption, especially service consumption, is on the mend,” Larry Hu, chief China economist at Macquarie, said in a note Friday.

“The message from the ‘golden week’ is important because the recovery in the coming months has to be driven by consumption,” Hu said. “The V-shaped recovery so far has been largely driven by property, infrastructure and exports, which are 50% of the economy.”

“Given the recent policy turns, their growth rates might peak soon, or have already peaked. It’s encouraging that the other half of the economy, including consumption and manufacturing investment, is catching up,” he said in the note.

Hu expects that retail sales could rise 3% to 4% in October from a year ago.

The nearly 5% growth in retail sales during the holiday season this year, as reported by the Commerce Ministry, was slower than the 8.5% pace during the holiday in 2019, which recorded total sales of 1.52 trillion yuan.

And the increase in spending did not necessarily help all online shopping platforms equally.

Daily active users for group-buying site Pinduoduo rose during the holiday from the average seen in September, according to CNBC analysis of data from app developer services company Aurora Mobile. The analysis showed growth for short-video and livestreaming apps Kuaishou and Douyin, which include e-commerce functions.

On the other hand, the data showed average daily active users on JD.com and Alibaba’s Taobao and Tmall e-commerce sites declined slightly during the holiday from last month’s average.

The major challenge for China’s economic recovery from the coronavirus’ shock remains ensuring employment and expectations of future income.

Even as overall economic growth rebounded, the portion of Chinese internet users earning 2,000 yuan ($294) or less a month increased to 43.2% in June, up from 39% in March, according to CNBC’s analysis of data released late last month by government agency China Internet Network Information Center (CNNIC). Those earning 1,000 yuan or less a month accounted for 21% of internet users in June, mildly higher than March.

The share of users in the highest-earning segment of 8,000 yuan ($1,176) a month or more in income declined from 13.3% in March to 11.5% in June.