Chinese holiday travel makes a slow recovery as Omicron spreads

Hundreds of millions of Chinese people are expected to make the trip back to their hometowns over the Lunar New Year break, though holiday travel is nowhere near pre-pandemic levels as Covid-19 spreads.

Many are making the journey home for the first time in years, after stringent testing and isolation rules for travelers last year prevented some people from taking the traditional extended year-end break. There had been about 290 million trips already in the first 11 days of the holiday travel period, according to Bloomberg calculations based on official statements and data, up 45% on the same period in 2021.

For the full holiday period through Feb. 25, the Ministry of Transport expects people to make 1.18 billion trips. That’s well below the almost 3 billion trips made in 2019, the last year before the pandemic broke out in China, and shows the recovery in travel and spending has a long way to go.

The week-long Lunar New Year holiday that starts January 31 this year is usually a time for Chinese families to gather, exchange gifts and eat out. That provides a boost to consumption, especially in rural and regional parts of the country as migrant workers return home.

However, subdued food inflation this year is a sign that consumers remain under pressure, according to Lu Ting, chief China economist at Nomura Holdings Inc. Food prices declined 1.2% in December from a year earlier, compared with a 1.2% gain in December 2020.

“Even though some observers expect consumer spending in various areas such as food and beverage to go up with more people likely returning home than last year, that assumption is not supported by what’s happening with food prices,” he said.

Travel plans have again been disrupted this year by the spread in multiple cities of the highly-contagious omicron variant of the coronavirus. To avoid a widespread outbreak during the Beijing Winter Olympics, which begin next week, the government has called on people to reduce long-haul travel.

In places where there have been recent covid-19 outbreaks, including Beijing, Shanghai, the northern port city of Tianjin, and Xi’an in Shaanxi province, residents are being urged to not leave the cities unless necessary.

Home Sales

Authorities are trying to boost spending locally, with a focus on online sales and rural consumption. The National Development and Reform Commission, the nation’s economic planning agency, has called on e-commerce firms to offer coupons for holiday goods, and makers of new-energy cars and smart home appliances to offer discounts or reduce deposits, with the aim of increasing sales in the countryside.

The NDRC also said local governments in low virus-risk areas should ensure people can carry out “reasonable short-haul travel within the region and consumption activities” during the holiday.

The holiday period is traditionally a strong period for home sales, as people have time to shop for apartments in their hometowns. Property companies will be watching anxiously to see if that holds true this year, or whether the collapse in sales in the second half of 2021 continues.

Authorities are also encouraging factories to keep running during the holiday, providing a boost to manufacturing during an otherwise slow period.

In cities such as Ningbo in the east and Hefei in central China, a daily subsidy of at least 100 yuan ($15.70) per person is being offered to workers to encourage them to stay at work or to return early to their jobs after the break, according to a report by state broadcaster China Central Television.

Those efforts are likely to be another brake on already weak restaurant demand and could also hit consumption of food and other goods. The government’s crackdowns on various sectors over the last year and the continued housing market slump have slowed economic growth and put a strain on the labor market, hitting people’s incomes and willingness to consume.

“Retail sales, after inflation, may pose negative growth through the second quarter, impacted by factors like the economic growth slowdown, delayed payments to migrant workers, layoffs at private education and technology companies, and reductions in the salary of government employees,” said Nomura’s Lu.