China's Golden Week reveals cautious consumer spending despite travel surge

Ya Xi just returned to Shanghai on a red-eye flight after her Golden Week trip to Southeast Asia. "I can stay up all night for a cheaper ticket," she told DW.

She was among the 31.19 million passengers who traveled during the 13-day holiday period that followed the Mid-Autumn Festival on September 25 and China's National Day on October 1.

Many of them spent their budgets more cautiously this year.

"I earn less this year, so I'm lowering my budget for this year's Golden Week," said Xi, who is in her mid-20s. "I spent 5,000 yuan (about €660) on my flight, which was the largest expense of my trip."

Golden Week is viewed as a barometer of the Chinese economy with Beijing using it as an opportunity to showcase the world's second-largest economy's spending power. State media, for instance, reported a record-breaking 25.204 million passenger trips on China's railway network on October 1.

However, early data indicated more moderate spending per traveler and broadly flat passenger traffic, according to Citigroup analysts. Traffic volume during the first four days of the holiday rose just 0.1% year over year, far below the 3.5% increase seen during this year's Labor Day vacation.

Selective spending among younger consumers

Lizzi C. Lee, a fellow on the Chinese Economy at the Asia Society Policy Institute, told DW that Chinese consumers are becoming increasingly selective.

"My read is that people are willing to get out and spend. They're just being much more careful about how much and what they spend on," Lee said.

But being cautious doesn't mean staying frozen, she added. "They'll spend on travel, concerts, restaurants, experiences, and tech… if they think it's worth it, they'll economize pretty aggressively elsewhere."

Xi's Golden Week trip followed this pattern, paying more for significant experiences and economizing elsewhere: "Eat, drink, and be merry," said Xi, indicating she was willing to spend more on food. For example, she set a 200-yuan (about €26) budget for each meal.

Guo-Chen Wang, an associate research fellow at the Chung-Hua Institution for Economic Research, told DW that the budget-travel trend among Chinese visitors was ongoing.

"The number of trips is increasing, but consumption remains strained, as I saw in past years," Wang said.

The Chinese government attempted to boost Golden Week spending by providing coupons worth more than 310 million yuan (€41.2 million). Wang remained unconvinced about the effectiveness of such a measure: "That's an old solution to an old problem."

A sign of China's weak domestic demand

It isn't the first Golden Week to see weak consumer demand. During last year's holiday season, the average spending per trip was 911.04 yuan (around €121), the lowest in three years, according to Reuters.

"Beijing still believes the low spending was due to consumers' reluctance [to spend]," Wang said. "In fact, we think Chinese consumers are unable to spend."

While savings kept increasing in Chinese banks, Wang said the vast majority of the savings are held by a small proportion of the population. "In other words, the majority of Chinese people don't have savings."

"The fundamental issue is the wealth gap in Chinese society," he said. "I don't know whether Beijing really neglected this problem or was simply unwilling to face it."

A recent International Monetary Fund publication, Toward a New Economic Growth Model for China, once again noted that China's domestic demand has been weak since the pandemic, when the property market correction began.

Lee, however, saw weak spending during this Golden Week as a confidence problem.

"The property downturn has hit household wealth, income and job expectations are still pretty soft, and several years of weak prices have trained people to wait for discounts and hunt for value," she told DW.

Tightened cross-border rules played a limited role

Weeks before the Golden Week, China's tightened travel restrictions took effect on September 15. The new restrictions ban citizens from leaving the country if they are deemed to pose a risk to national as well as industrial or technological security.

Wang expected Chinese tourists to turn to domestic travel under the new rules, but the outcome did not match his expectations. "The volume of travel abroad is in fact growing, though not by much," he said.

Lee said she saw little evidence of a broad chilling effect on ordinary outbound tourism, with the Golden Week numbers serving as a "useful reality check."

"The September rules give authorities more room to verify travel purposes and ask for additional information in some cases," Lee said. "They still leave plenty of room for ordinary overseas tourism."

Mi Tang in Taipei contributed to this article.