China Macro: Data Prints Over the Holiday

Zerlina Zeng, CFA - Head of China Macro & East Asia Industrials
Zoey Zhou Qianyun, CFA - LGFVs & East Asia Industrials Analyst
Nicholas Chen - Asia-Pacific Corporates Analyst

Executive Summary

  • Data prints over the last two weeks of December pointed to broadly stable macro conditions in China with improving domestic tourism, growing industrial profits, and accelerating construction PMI. However, there remained weak links in the Chinese economy including sluggish new home sales, weakening external demand and a challenging labor market. As a result, we continue to expect monetary and fiscal policy to be proactive to meet an ~5% real GDP growth target in 2024.
  • Over the 3-day New Year’s Day holiday, domestic tourism and passenger traffic improved compared to the National Day Golden Week holiday in October; however, mainland visitors to Hong Kong remained subdued, pointing to headwinds for tourism-sensitive retail sales and shopping malls. The number of domestic travelers and domestic tourism revenues over the New Year’s day long weekend were 9.4%/5.6% above the pre-pandemic levels in 2019 and improved from the Golden Week (4.1%/1.5% above 2019). Long-haul domestic trips and subway ridership in major cities also exceeded 2019 levels, according to travel booking apps and WIND data. However, tourism consumption per head remained 3% below the pre-pandemic level, which reflected a continued consumption downgrade of Chinese households. Meanwhile, the National Immigration Administration reported that cross-border travels over the 3-day period have recovered to pre-pandemic levels thanks to the relaxation of overseas group tours, better airline capacity and a stabilizing RMB. Although Hong Kong was one of the most popular travel destinations for Mainland Chinese tourists based on various Chinese travel platforms, Mainland visitors to Hong Kong were still below 70% of pre-pandemic levels, according to other media reports, pointing to continued headwinds for retail sales that are sensitive to mainland tourism (e.g., jewelries & watches, cosmetics & drugs) and high-end shopping malls catering to mainland luxury goods shoppers.

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