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China's consumer market picks up after shift in COVID response-Xinhua

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A cook serves roast duck to customers at a restaurant in a shopping mall in Beijing, capital of China, Dec. 25, 2022. (Xinhua/Ren Chao)

BEIJING, Dec. 31 (Xinhua) — With the latest optimization of China’s COVID-19 response, the country’s restaurants, malls and cinemas have reopened and reported booming foot traffic, a sign that, bodes well for the revival of the country’s consumer market in 2023, say experts.

In Beijing, hordes of people thronged outside restaurants in shopping districts, waiting for seats at peak times. Popular restaurants saw more than 80% of customer traffic over normal hours, with some even seeing a full house.

It’s the same for cinemas. Cinema staff confirmed that attendance at some cinemas in Beijing has returned to 75% of the usual level. Cinemas are expected to see more moviegoers as the New Year and Spring Festival holidays approach.

The recovery momentum in consumption is further boosted by the boom in the ice snow industry in the first snow season after the end of the Beijing 2022 Winter Olympics. Data from the travel service provider Trip.com Group online show hotel bookings linked to ski venues in Beijing jumped 99% week-over-week from Dec. 19-23.

Due to the lingering COVID-19 pandemic, the consumer market in China has taken a hit. In the first 11 months of this year, the country’s consumer goods retail sales edged down 0.1 percent year-on-year. The catering industry and other contact sectors suffered the heaviest losses.

COVID RESPONSE CHANGE

To better coordinate anti-virus efforts and economic development, China has been dynamically optimizing its COVID-19 response policies. In its latest move, China announced the downgrading of the management of COVID-19 from January 8, 2023, treating it as a Class B infection rather than a more severe Class A infection.

Adjustments to China’s COVID-19 response will effectively drive the recovery in consumption, with foodservice consumption driven by local demands possibly taking the lead in the recovery. Non-local demand-driven hotel, tourism and aviation consumption would follow, said Wu Yifan, deputy director of a research institute under Hua Chuang Securities.

Continued optimization of COVID-19 policies would significantly boost consumption growth next year, said Wu Chaoming, chief economist at the Chasing International Economic Institute.

Wu predicted that per capita consumer spending by Chinese residents would increase from 8% to 12% in 2023, and that total retail sales of consumer goods would increase from 7% to 11%. He said COVID-19 policies would restore offline consumption and strengthen residents’ willingness to travel and spend.

PRO-CONSUMER POLICIES

Experts believe that promoting consumption will be high on China’s political agenda for next year.

The country issued a guideline on facilitating consumption on all fronts and accelerating the improvement of consumption quality earlier this month. The annual Central Economic Work Conference held in mid-December also noted that China will prioritize the recovery and expansion of consumption next year.

CITIC Securities chief economist Ming Ming expected China to step up the issuance of consumer bonds in this regard, given its wide reach among residents.

Ming said localities across the country issued 23 billion yuan (about $3.3 billion) in consumption coupons this year, with a projected leverage of five times.

Given the combined forces of other pro-consumption policy incentives, experts are optimistic about China’s consumption prospects in the future.

“In the short term, the consumer market in China will pick up, with travel and service-related consumption seeing a stronger rebound. In the medium to long term, consumption will become a major driver of economic growth,” said Huang Wentao, chief economist at China Securities.

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