Photographer: Johannes Euseke/AFP via Getty Images

China's New Year Travel Binge Set to Show Rebalancing in Action

  • Retailers and restaurants may ring up $100 billion in sales
  • Ctrip.com projects a record 6 million overseas trips next week

Chinese consumers, pillars of strength in a slowing economy, are ramping up spending as the Lunar New Year holiday approaches.

Travelers will make a record 2.91 billion trips by road, rail, air and water over the holiday season, up 3.6 percent from last year, according to the National Development and Reform Commission, the country’s top economic planner. Six million will head to foreign destinations during the week-long public holiday, while retailers and restaurants will probably ring up more than $100 billion in sales.

The spending binge underscores the rebalancing to consumption and services from China’s historic dependence on investment and exports for growth. That’s making industries like tourism, health care, education and entertainment the economy’s new drivers as the old rust belt sectors like steel and coal struggle with overcapacity.

"A growing middle class fuels tourism," Alicia Garcia Herrero, Asia-Pacific chief economist at Natixis SA in Hong Kong, wrote in a report. "Under the backdrop of improved living conditions and transport infrastructure, Chinese find traveling easier and more accessible."

Epic Migration

The epic migration drives spending on everything from gasoline to gifts. China’s 1.37 billion citizens will each make 2.1 trips on average during the broader holiday season, which spans Jan. 24 to March 4. That’s like moving all 321 million Americans nine times over.

Travel website Ctrip.com projects a record 6 million overseas trips next week (the equivalent of everyone in Denmark taking off). Thailand, Japan and South Korea top the list of destinations, suggesting many will snap up cosmetics in Tokyo or splash in resort pools in Phuket.

China’s local tourism capacity is way lower than the demand, according to Chen Xingdong, chief China economist at BNP Paribas SA in Beijing. Further growth will be driven by the need to upgrade and "meet the demand of increasingly sophisticated Chinese consumers," he said, and improvements across entertainment and restaurants will help offset the slowdown.

Travellers arrive with their bags at one of the main train stations in Guangzhou as they prepare to head home for the upcoming Lunar New Year.
Travellers arrive with their bags at one of the main train stations in Guangzhou as they prepare to head home for the upcoming Lunar New Year.
Photographer: AFP via Getty Images

Growth Driver

Spending will get a boost from the essential elements of Chinese family reunions and gatherings: presents, banquets and movie nights. Restaurants and retailers reported 678 billion yuan in sales during the holiday season last year, up 11 percent from 2014, while box offices took in 900 million yuan, according to the commerce ministry.

The outlook is even better this year thanks to blockbusters such as Kung Fu Panda 3, which took in 338 million yuan in the first three days in theaters, according to EntGroup Inc. Cinemas reported a 47 percent jump in total sales in January from a year earlier, according to the Beijing-based entertainment industry research firm.

Sausages, Refrigerators

Meanwhile, Alibaba Group Holding Ltd. rang up 2.1 billion "special purchases" in late January ranging from smoked sausage to refrigerators. The online marketplace features a range of goods and presents for the holiday, which is also known as Spring Festival.

Consumers born after 1980 made 81 percent of those purchases, according to the Hangzhou-based company. Clothes made up 36 percent of items transacted while food accounted for 15 percent. While urban youths favored wearable digital products, migrant workers bought home appliances for their rural families, according to Alibaba’s report.

As some travel tallies are poised to break records, harsh winter weather may put a dent in rail travel. Snow in northern China caused delays in the nation’s massive rail network this week, leaving as many as 100,000 travelers stranded Monday at the train station in the southern city of Guangzhou, according to a statement from the city’s police.

— With assistance by Xiaoqing Pi

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