Chinese Economy Further Recovers During May Day Holiday
Tourism is one of the economic sectors of China that were most severely hit during the coronavirus pandemic. During the May Day holiday, tourism underwent a significant recovery. Photo: AP
From April 29 to May 3, Chinese people celebrated their Labor Day/May Day holiday. The five-day holiday marks another major break after the Lunar New Year since the end of the lockdown due to coronavirus. During the holiday, many left their work and home to travel, which brought much economic vitality to the country.
Before the holiday started, the travel booking record surged past the pre-coronavirus levels in 2019. Major tourist attractions are crowded with travelers. Beijing, Shanghai, Nanjing, Guangzhou, and other major Chinese cities ushered with more than 100 million visitors. As reported by People’s Daily, Chinese tourists favor historical sites, pedestrian malls, and natural sceneries.
During the holiday, China’s national consumption has rebounded further since January. According to the Chinese Ministry of Commerce, the sales of national key retail and catering enterprises increased by 21.4 percent compared to last year. In particular, the catering industry grew at an astounding rate of 36.9 percent compared to the previous year.
Data from the transportation industry also reflected the rebound. As reported by China State Railway Group Company, national railways are expected to send 120 million passengers from April 27 to May 4, an increase of 20 percent over the same period in 2019. At the same time, the passenger flow of highways and civil aviation continued to operate at a high level.
Wan Zhe, the Chief Economist of the International Cooperation Centre of National Development and Reform Commission under the Chinese government, said that the May Day consumption growth “echoes the accelerated recovery of the consumer market in the first quarter, which is obviously a very positive signal."
Wan revealed that the Chinese government is now paying more attention to promoting consumption. “Our government put the improvement of the consumption and business environment in an equally important position. We have to ensure a foundation of longer-term growth of the Chinese economy and further boost our people's confidence,” Wan said.
China’s Purchasing Managers Index (PMI), a measure of the prevailing direction of economic trends in manufacturing, underwent a sharp decrease since March 2023, which reflected a comparative decline in China’s manufacturing sector. PData: CEIC Data
Nonetheless, some analysts pointed out that China needs to caution against overspending beyond one’s income level. If people spend more than they can earn, their consumption will ultimately have a sharper decline than in the case of underspending. Moreover, how the different income groups share the consumption boost is worth more elaboration, and economic policies should allocate the poorer population more consumption ability.
Most importantly, the recovery in consumption comes with a contraction in manufacturing. The contraction points to a longer-term worry that the global demand for Chinese products is slipping.
“The big surprise in China’s April PMI survey – manufacturing fell back into contraction — raises doubt about the strength and durability of the recovery. The key factory sector is shrinking despite strong government spending and robust demand in pockets of the services industries. Bottom line: the recovery is probably too narrow to be sustainable — and risks losing steam. This worrisome outlook increases the case for more policy support,” said Bloomberg Economics.
The decline in China’s manufacturing sector is speculated as due to political pressure from China’s confrontation with the West and a general global recession since the start of this year. The consumption rebound during the May Day holiday undoubtedly marked a good sign for the Chinese economy in the short term. Still, the Chinese economy's future remains uncertain, depending on the longer-term factors mentioned above.