Domestic passenger traffic in China is recovering

During the five-day May Day 2023 holiday in China, its citizens made 274 million trips by all modes of transport, which is 70.8% more than in 2022 and 19% more than the first pre-pandemic 2019. This was announced by the Ministry of Culture and Tourism of the People’s Republic of China on its website. According to the agency, from April 28 to May 3, the nightly domestic passenger traffic of 243 agglomerations amounted to 77.68 million people, which is 14.5% more than the same period in 2022. Among the most active are Nanjing, Changsha Commercial District, Chengdu, Xian, etc. The rise in domestic passenger traffic during the first nationwide holidays without sanitary restrictions in three years is one of the stimulus for the growth of the Chinese economy.

“Travel distances and consumer activity have reached record levels. The popularity of Beijing, Hangzhou, Dali and Xiamen, traditional popular tourist destinations in China, continues. The Internet celebrity cities of Chongqing, Changsha and Zibo, as well as niche destinations such as Changxing and Xiangju, are attracting much attention,” the ministry said in a statement. According to the forecast of the Chinese Academy of Tourism, about 4.55 billion domestic tourist trips will be made this year, which is 73% more than in 2022.

Chinese tourism spending is also recovering. During the May holidays, Chinese citizens spent 148.056 billion yuan ($22 billion) – 28.9% more than in 2022, and about the same as in the pre-pandemic May Day 2019 (+0.66%). During the May Day five-day period, 31,100 commercial performances were held in China, including film screenings, with box office receipts of 1.519 billion yuan ($219.7 million).

The data of the Chinese Ministry of Tourism was preceded by the publication of the State Bureau of Statistics (GBS) of the PRC dated April 30. According to him, business activity in the services sector continued to grow, although its pace slowed down in April. The PMI index (the level of business activity of enterprises. – Vedomosti) in the non-manufacturing sector of the country amounted to 56.4 in April 2023 (58.2 in March). A PMI index above 50 indicates the expansion of the sector, below 50 – its contraction.

According to the results of the 1st quarter of 2023, China’s GDP grew by 4.5% compared to the 1st quarter of 2022 and by 2.2% by the 4th quarter of 2022, China’s GBS reported on April 18. After that, Citi raised its forecast for China’s GDP growth in 2023 from 5.7% to 6.1%. Back in March, the annual forecast of the International Monetary Fund was improved to 5.4%. The growth target set for the Chinese economy at the beginning of the year by former Chinese Premier Li Keqiang is 5%. This landmark was announced after the Chinese authorities in early December 2022 set a course to abandon the policy of “zero tolerance” for the coronavirus. Against the backdrop of such a policy in the previous year, the Chinese economy for the first time since the start of reforms in 1976 failed to achieve the target of 5.5% GDP growth and was limited to 3%.

The growth in the volume of domestic transportation and spending by Chinese citizens during the May holidays is a marker of the recovery of domestic demand for services and a sign of a gradual recovery of the country’s economy, said Sergey Lukonin, head of the China Economics and Politics Sector at the Center for Asia-Pacific Studies at IMEMO RAS. In general, this phenomenon is consistent with the course of the Chinese authorities to ensure growth based not on exports, but on the domestic market, creating in the future the so-called dual circulation system, the expert points out. Those problems that were noted during the pandemic and as post-COVID restrictions are lifted, judging by official indicators, are gradually being resolved, he says.

This year, the Chinese authorities deliberately made the May holidays long in order to stimulate domestic tourism and consumer demand, says Yana Leksyutina, professor at St Petersburg University. In her opinion, this reflects the authorities’ concern about very low GDP growth in 2022 and a generally strong decline in consumer demand in China, as well as a severe blow to the service sector caused by coronavirus restrictions in 2020-2022. But now, at least according to the Chinese relevant departments, consumer demand is showing a recovery and the main thing for the authorities and business is to revive the service sector, Leksyutina believes. “It is no secret that during the coronavirus restrictions in China, small and medium-sized businesses were damaged. For example, many travel agencies ceased to exist altogether,” the expert says.

The Chinese have positive signs of an economic recovery, such as an increase in domestic tourism and spending on holidays, which can hardly be explained by any government steps, says Vasily Kashin, director of the HSE Center for Comprehensive European and International Studies, a sinologist. But Caixin’s manufacturing PMI index fell below 50, and the growth of non-manufacturing activity also slowed down, the expert reminds. “Thus, the situation is still uncertain. The GDP target is likely to be reached, barring some kind of cataclysm comparable to the first wave of the coronavirus. But here the question is what measures will have to be taken to achieve it,” concludes Kashin.