China’s New Year Holiday Spending Surpasses Pre-Pandemic Levels Despite Economic Struggles

China’s new year holiday spending last week surged past pre-pandemic levels, official figures showed, a rare bright spot for an economy struggling with sluggish consumption and deflation. Domestic spending on entertainment, dining, and travel soared during this year’s “Golden Week”, which officially ended on Saturday, according to a statement from Beijing’s Ministry of Culture and Tourism on Sunday.

Chinese travelers made 474 million trips across the country during the eight-day break, up 19 percent from 2019, the ministry said—the world’s largest annual migration. And domestic spending on tourism came in at 632.7 billion yuan ($87.9 billion), up 7.7 percent from 2019, the ministry said.

The latest holiday data showed that “there was substantial pent-up demand to be released,” Ting Lu, chief China economist at Nomura, said in a note on Monday. But he warned against reading too much into the strong spending figures, as “we need to take into account the very low base from last year during the height of the COVID ‘exit wave'”.

While total spending was up, the average spending per trip was down 9.5 percent from 2019, according to Nomura calculations. Analysts at Goldman Sachs also pointed to the “slightly longer-than-usual” holiday period this year, which they said “contributed to the record cross-region passenger flows and encouraged more long-haul travels”.

The holiday data comes after months of struggle by officials to kickstart growth in the face of a prolonged property-sector crisis, soaring youth unemployment, and a global slowdown that is hammering demand for Chinese goods. Policymakers have in recent months announced a series of targeted measures as well as a major issuance of billions of dollars in sovereign bonds, aimed at boosting infrastructure spending and spurring consumption.

Recent announcements including central bank interest rate cuts and measures to boost lending have had little impact so far, with consumer prices falling in January at their quickest rate in more than 14 years. The shift from China’s strict zero-COVID policy to a more relaxed approach also played a role in the increase in holiday spending, as it allowed for more freedom of movement and less disruption to businesses.

While China’s new year holiday spending has shown promising signs of recovery, caution must be exercised in interpreting the data. The challenges faced by the Chinese economy, coupled with the impact of the COVID-19 pandemic and global economic trends, continue to pose significant obstacles to sustained growth. Policymakers will need to implement effective strategies to stimulate demand, create jobs, and address the structural issues affecting the economy in order to achieve long-term stability and prosperity.