Consumption surges during Spring Festival, outbound travel booms

Data from the Ministry of Commerce (MOFCOM) showed that sales from dining and retail during the week-long Spring Festival holiday reached about 754 billion yuan, up 11.2 percent over the same period last year. In particular, outbound tourism consumption became one of the highlights. According to statistics from relevant authority, the number of tourists traveling overseas is likely to approach 6 million during the Spring Festival, making it the most flourishing golden week ever.

Data: consumption reached 754 billion yuan during the Spring Festival golden week

Data from the MOFCOM showed that during the 2016 Spring Festival golden week, consumer market across China maintained steady and rapid growth. Folk-custom consumption and emerging consumption were booming, and traditional special purchase for the Spring Festival, popular catering, cultural, physical and entertaining activities and travel and leisure were highlights of festival consumption. Based on monitoring data, sales of retailers and catering firms from Feb. 7 to 13 reached 754 billion yuan, up 11.2 percent over the same period last year.

Besides, family reunion dinner and relatives and friends dinner party played leading roles in the catering market during the holiday, contributing to the boom of popular catering. “Internet Plus” also gave added impetus to the transformation and upgrading of foodservice industry. Folk-custom activities, leisure tourism and culture and entertainment consumption were welcomed by the public, and experiential consumption and emotional consumption are new trends. Cultural consumption was favored by people, with the box office across the country in the first three days in the lunar New Year totaled nearly 1.7 billion yuan, approximating the total box office over the last Spring Festival holiday, up about 80 percent year on year.

The National Tourism Administration (NTA) on Feb. 14 indicated that traveling abroad during long vacations has become a normal for Chinese citizens, which is evidenced by the peak season of outbound tourism during the 2016 Spring Festival holiday. From the purpose of trip, leisure travelers account for a higher proportion, and most of them prefer tropic islands and leisure cities. An increasing number of travelers favor mid- to high-end tourism products and independent travel. The most popular overseas destinations are Japan, Thailand, Taiwan, South Korea, Australia, Vietnam, Singapore, Indonesia, Hong Kong and the Philippines.

Data from various tourism institutions showed that the number of outbound tourists doubled during the Spring Festival golden week. Reports released by the China Tourism Academy and Ctrip lately indicated that the number of China’s outbound tourists is expected to be around 6 million during the 2016 Spring Festival holiday, making it the most flourishing Spring Festival golden week ever.

 “Explosive buying”: outbound tourism drives high-end consumption overseas

 “Tourism has become one of the most important consumptions during the Chinese New Year holiday, and consumption upgrading is the highlight in the tourism market during this Chinese New Year holiday,” sources from Ctrip told the reporter. Chinese people, particularly the medium and high income class, have continuously increased their consumption frequency and spending on traveling. Tourism service consumption has become a new engine for Chinese economy.

Booming outbound travel drives overseas consumption. Data from NTA showed that the number of China’s outbound tourists reached 120 million, ranking first in the world together with the consumption. Data from the MOFCOM indicated that Chinese tourists spend about 1.2 trillion yuan overseas, and continue to keep the title of the world’s major tourist consumption group.

The word “explosive buying” has become a synonym of Chinese people’s overseas consumption. In addition to shopping for daily necessities such as toilet lid and electric cooker, and high-end brand goods such as wrist watch and luggage, to pay for experiences and services have become prevailing customs. The first Spring Festival themed tourism report released by Ctrip showed that the Spring Festival tourism has for the first time labeled as a theme. Healthy physical therapy, hiking, skiing, exploring the nature, Zen meditation, golf, in-depth photography and travel wedding were themed travel categories most favored by consumers. Nearly 20 percent consumers chose healthy physical therapy during the Spring Festival holiday. The reporter learnt that healthy physical therapy themed products stand out among all the categories with the highest average price, with consumption per person of over 20,000 yuan.

Strength: various departments study policy to guide consumption backflow

Experts pointed out that according to statistics, China’s overseas consumption recorded 1.2 trillion yuan in 2015, and the total retail sales for social consumption reached 30.1 trillion yuan in the whole year. In other words, overseas consumption accounts for around 4 percent of domestic consumption, and the consumption will increase by 1 percentage point, if 25 percent of overseas consumption can be guided back to China. Therefore, consumption growth should not only rely on domestic consumption but also depend on attracting more overseas consumption back to China.

 “Supply side is the key issue to cause consumption outflow”, Gao Hucheng, Minister of Commerce, pointed out recently. He also mentioned various factors: 1) insufficient types; 2) unreliable quality; 3) huge price spread between domestic and overseas markets; 4) safety; 5) inconvenient circulation.

In terms of price spread mentioned above, a consumption report from Chinese Academy of International Trade and Economic Cooperation, MOFCOM points out that the consumer goods price is much higher than that in overseas market, and transparency of consumption price makes consumers reluctant to pay for great price spread, enormously hitting the consuming desires to shop in domestic market.

Insiders also pointed out that China’s current consumers mainly are those born in the 1980s, who focus more on personalized consumption, brand influence and additional value. Currently in the domestic consuming market, commodity supply is obviously not able to follow the changing consumption concept.

Huang Zhiling, chief economist of China Construction Bank Corporation (601939.SH), mentioned that there is no restriction on China’s consumption demand, no matter consumption level, ability or desire. However, Chinese citizen’s actual consumption demand is increasingly limited by various factors, such as slow supply structural upgrading and insufficient innovative capability. Effective supply capacity is not enough, causing two results: people keep the money and wait for purchase, or they meet their demands through overseas purchase to trigger “demand overflow”.

The reporter learnt that the MOFCOM, General Administration of Customs and Ministry of Finance are studying policies to further guide consumption back to China.

The Central Economic Working Meeting 2015 stressed that China should properly expand the total demands while reinforcing the structural reform on the supply side in 2016 and for years to come. New trend of commercial development should be lead based on promoting the said structural reform, according to a national commercial work meeting held recently.

 “For example, building modern market system, lowering logistics cost, hitting infringement and counterfeit, releasing regional restriction, reinforcing credit construction and cultivating China time-honored brand are part of the supply side reform based on consumption.” Relevant insiders told the journalist that key point of the policies this year will follow a trend that middle-income groups rapidly grow, and encourage social and foreign capital to provide diversified services to meet basic consumption demands. On the other side, these policies should also promote intelligent commerce, encourage transformation and development of dining and hotel industry, positively build branded service platform, and enlarge qualified consumption.