MNI: Tourism, Coupons Eyed To Boost China's Consumption
MNI (BEIJING) - Beijing and Shanghai should rapidly remove restrictions introduced during the Covid-19 pandemic, such as reservations for attractions, to help boost tourism alongside the increased issuance of consumer coupons to promote consumption this year amid softening domestic demand, advisors told MNI.
Hong Tao, vice-chairman of the China Consumer Economics Society, noted the reduction of inbound visitors and restrictions hindering the free flow of tourists alongside a high-base effect drove spending declines in Beijing and Shanghai, which fell 14.1% and 13.5% y/y over November.
Retail sales at a national level rose 3.0% y/y in November, unexpectedly slowing from October’s eight-month 4.8% high.
Hong said retail sales in the two cities totalled CNY1.45 and 1.85 trillion in 2023, both exceeding CNY1 trillion over the past decade. Consumption will experience an immediate rebound should the number of foreign visitors in Beijing and Shanghai return to the 2019 level of 3.77 and 8.97 million from Q3’s 2.72 and 4.61 million.
“The latest 240-hour visa-free transit policy has helped to boost the number quickly,” added Hong, who is also the director of the Institute of Business Economics at Beijing Technology and Business University. Authorities should give private and small businesses more autonomy and strengthen their protection under the law, while retail sales calculations should expand to include services, which accounted for over 84% and 75% of Beijing and Shanghai’s overall spending in 2023, he continued.
CONSUMER CONFIDENCE
Zhan Yubo, director of the Innovation Economy Research Centre at the Shanghai Academy of Social Sciences, told MNI consumers in Beijing and Shanghai are becoming more cautious and saving more as house prices decline, noting that some upscale restaurants had closed due to lack of customers.
Fitch Ratings analysts said disposable income growth rates in the two cities were lower than the national average due to the retreat of foreign-funded companies, salary cuts in the financial sector and layoffs among internet companies.
Consumer confidence has sunk even further since the pandemic to 86.2 in November, lingering at historically low levels and far from the 100 median, according to the National Bureau of Statistics.
Shanghai has offered CNY500 million in consumer coupons since September, a relatively large scale among China’s cities, but Zhan said the limited amount for each consumer is not enough to stimulate additional spending. “Local governments should further increase the scale while better designing the issuing mechanism to target lower-income groups,” Zhan said, noting that middle-class spending propensity is more closely linked to the equity and housing market recovery.
Expected interest-rate cuts amid Federal Reserve reductions will help ease funding conditions on the stock market this year, he added, though this would likely not promote a broad and rapid housing market recovery that might aid consumption.
TRADE-INS
China is likely to increase funding support for the proven consumer trade-in programme following the National Development and Reform Commission’s decision to include electronic devices such as cell phones last week, said Zhan. (See MNI: Special Treasuries To Boost China's Consumers In 2025)
Measures to increase income such as cleaning up unpaid wages and improving overtime and related allowance, can be expected in the near term, though signals regarding longer-lasting measures to reform the distribution of income or social security remains unclear, Zhan continued.
Hong expects retail sales to grow about 5% y/y in 2025, compared with the expected 4% in 2024, with consumption likely to contribute over 50% to this year’s GDP growth.