Stay informed with free updates
Just sign up to Chinese economy myFT Digest: delivered straight to your inbox.
China’s annual Lunar New Year travel rush is expected to reach “historic” levels this year, as politicians hope the country’s holiday season will help lift the world’s second-largest economy out of deflation.
Chinese travelers made more than 230 million “inter-regional” trips on Tuesday, the most recent data available, for the New Year break, the transport ministry said on Friday. This is an increase of 5.8% compared to the same period in 2023 and 1.1% compared to 2019, before the pandemic.
Authorities predict that during the entire 40-day span of what state media is calling the “Spring Festival holiday travel rush,” which runs from January 26 to March 5, Chinese residents will make 9 billion trips , 80% of which using private vehicles.
“This year’s Spring Festival travel rush is set to make history,” Li Yang, vice minister of transportation, said in a preview of the festival’s travel arrangements in January.
This Lunar New Year, which begins Saturday, is the first since 2019 not to be affected by the coronavirus pandemic, making it an important barometer of consumer confidence. China has struggled to mount a strong economic recovery in the wake of the pandemic, with gross domestic product growing 5.2% last year.
China’s official statistics agency this week reported a steeper-than-expected year-on-year contraction in the consumer price index for January – the fifth month in which prices remained stable or falling – raising concerns that a cycle deflationary is taking root.
Alicia García-Herrero, chief Asia-Pacific economist at Natixis, said that while the number of trips may increase, consumers are unlikely to spend as much as in previous years given the weak economy, slowing real estate and low trust.
“There is some pent-up demand for travel, so that could be good, but I don’t think the spending side will be as good,” he said.
China’s congress is due to meet in March to set the growth target for 2024, with most economists predicting it will be the same as last year’s 5% – the lowest target in decades and one that will be harder to achieve reach. reach this year unless the housing market stabilizes.
But economists said an increase in consumption in February due to the festival, as well as a more favorable base effect starting in 2023, could push the CPI into positive territory this month.
“Preliminary data for Lunar New Year activity is rosy,” HSBC analysts wrote in a note. Demand for domestic travel was higher than pre-pandemic levels, with train ridership up 22% and air travelers up 17% for the first 12 days of vacation compared to the same period in 2019.
The Ministry of Commerce reported that, as of the end of January, sales on major e-commerce platforms increased 20% compared to the previous year, while overall online retail sales increased nearly 9% compared to 2023 .
“The Chinese Lunar New Year Holiday. . . provide a snapshot of the country’s economy,” Gavekal said in a research note.
He said travel and tourism were the best-performing element of “an otherwise uninspiring economic recovery,” largely because they were suppressed by pandemic controls.
“The question will be exactly how much better the numbers will be compared to the same period in 2019 and, consequently, what this will indicate about households’ willingness to spend,” Gavekal said.