China’s Lunar New Year travelers surge to boost economy, but real estate market and private businesses remain top priority

Economists also said China needs to focus on resolving the ongoing real estate market crisis and help private companies secure similar expansion in 2024 as pent-up demand wanes. .

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After declining by 2.3% in 2022 due to frequent lockdowns under China’s zero-corona policy, China’s accommodation and catering industry will increase by 14.5% year-on-year in 2023, accounting for a major share of gross domestic product (GDP) growth. The National Secretariat announced that this was the driving force. The statistics were released last week.

This was the second largest year-over-year increase in the last 30 years, behind the 15.6% rise in 2021, when the industry recovered from a very low comparative base due to the unprecedented coronavirus pandemic.

China’s transportation, warehousing, and postal industries also showed a strong recovery with 8% growth last year, but fell into negative expansion in 2022.

This trend is expected to continue during the eight-day extended Lunar New Year holiday in February, with travel bookings through major travel agencies exceeding pre-pandemic levels.

China had lifted health measures in early 2023, but the Chinese New Year travel period was hit by a surge in coronavirus infections triggered by the reopening.

“The continued enthusiasm for travel this year is clear. [Lunar New Year] “This period is also the most important busy season for the catering industry,” Shanghai Securities said on Sunday.

“Performance in 2024” [Lunar New Year] It is expected to foster optimistic market expectations for service consumption. ”

Hotel bookings through Fliggy Travel for the 2024 holiday season are already 160% higher than the same period in 2019, and group tours are up 34%, the company announced last week.

Dongcheng Travel announced last week that average domestic flight prices also rose to the highest since 2019.

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China announces that the spread of new coronavirus infection has reached its peak as the Lunar New Year travel rush gets into full swing

China announces that the spread of new coronavirus infection has reached its peak as the Lunar New Year travel rush gets into full swing

Air China confirmed this week that it had booked about 1,700 flights per day over a 40-day period. Chunyun Travel lengths have been shortened to meet extraordinary demand, up 32% from 2019.

However, although China’s economic growth rate last year was in line with the target of “about 5%”, achieving a similar target in 2024 is unlikely due to the low base effect and fading pen-up demand. It won’t be easy, said executive director Lian Ping. Member of China Chief Economist Forum.

“Consumption, which contributed to an exceptionally high 82.5% of GDP growth last year, will return to normal levels this year, contributing around 60%,” he said.

“Economic growth depends primarily on the performance of the private sector, whether market risks are mitigated and, most importantly, whether the real estate industry can stabilize.”

The real estate sector experienced a 1.3% year-on-year decline in value added in 2023, hurting local government revenues as well as many related sectors, from furniture to textiles.

Local authorities have launched a series of support measures to encourage home buying in the past few months, which could bear fruit in the coming months, Lian added.

But Harry Murphy Crews, an economist at Moody’s Analytics, said last week that continuing problems in the real estate market will dampen private investment and consumer spending.

“Success in 2024 will mainly depend on how effective the authorities are in turning the real estate market around,” he said.

“If not for the monster splurge of the past few years, real estate investment, home prices, and new home sales will decline throughout 2024.”

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“Local governments no longer have the financial capacity to build infrastructure, which often involves large sums of money and bank loans, which can further strain the economy,” he added.

“Rather, it would be better to make the most of the resources at hand to support small and medium-sized businesses and independent businesses, which could have more direct consequences for the economy.”

Since China’s economic reopening last year, declining confidence in private companies has also been widely recognized as a major challenge for China, with most of the companies being small and medium-sized enterprises that contribute more than 60% to China’s GDP and account for 80% of employment. .