1 Mar 2024
The number of domestic tourism trips during the main eight-day period of China’s Spring Festival rose 19% from last year’s level to reach a record high of 474 million. Total spending was also up, +7.7% from 2019 levels (Ministry of Culture and Tourism, 18 February), but per capita spend per trip fell 10%, suggesting that consumers are shifting spending habits towards more budget experiences, but going out more. If this robust spending momentum sustains, it could feed into more durable goods spending and provide a boost to retail sales.
However, strength is not just on the domestic side: international tourism also boomed due to mutual visa exemptions and route resumptions as well as a low base. During the holidays, there were approximately 3.6 million outbound tourists, with Southeast Asian countries being popular destinations, and 3.2 million inbound tourists (China Daily, 18 February).
Property sales slowed during the Lunar New Year holidays, as expected, with people travelling or returned home. But we still saw some green shoots. According to high-frequency data,second-hand home sales ticked higher after the holidays, despite being elevated beforehand (see charts 1 and 2). We think second-hand home sales are likely to be a leading indicator for further stabilisation in the overall commercial housing market as households look to upgrade their homes.
Source: Wind, HSBC
Source: Wind, HSBC
Meanwhile, on 20 February, a larger-than-expected 25bp cut to the 5-year loan prime rate (LPR) to 3.95% was announced, which could help usher in lower mortgage rates, boosting sentiment and demand. Alongside support from eased home purchase restrictions and interest rate cuts, we think further support for developing public housing will also help to stabilise the sector. This could come in the form of additional Pledged Supplementary Lending (PSL) to provide funding for local governments to convert existing commodity housing to public housing.
Speaking at the latest State Council meeting, Premier Li Qiang called for the spring season to be a time of action and for speedy implementation of the plan laid out at the December Central Economic Work Conference (Xinhua News, 19 February). The more aggressive monetary moves point to determination to help support the economy, particularly the property sector,though will likely also benefit longer-term capital expenditure investments.
As policymakers gear up for the annual meetings of the Chinese People’s Political Consultative Conference (CPPCC) and National People’s Congress in March (beginning on 4 and 5 March,respectively), we expect more policy coordination. Fiscal policy will likely play a leading role,but monetary policy may also provide support through more rate cuts as other central banks begin their easing cycle. Meanwhile, targeted policy support for new growth areas such as manufacturing upgrading and green development will likely continue.
Source: Refinitiv Eikon
* Past performance is not an indication of future returns
Source: Refinitiv Eikon. As of 22 Feb 2024 market close
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