China relies on half a billion middle class – willing to spend money on tourism, but this may be shaky when the post-epidemic economy is still bleak.
In winter, well-off tourists will go to Zibo for a barbecue party and then flock to Harbin to admire the ice lanterns. After that, they enjoyed super spicy numb noodles and hot pot. Currently, this world flocks to Chengdu to see cherry blossoms and mustard flowers blooming in spring.
Like flowers blooming yellow and pink in Chengdu, the recovery of domestic tourism in China is considered “a remarkable thing” over the past year. But the spending outlook for China’s 500 million middle class remains gloomy, even as local governments across the country roll out new initiatives to boost spending.
Tourists visit Yu Garden, a popular tourist destination in eastern Shanghai at the end of 2023. Photo: Xinhua
Since 2023, Beijing has increased measures to promote spending in many sectors, including tourism, to restore the post-epidemic recession. The middle class is willing to spend money on education and travel, but the prospect of more jobs is “not certain yet”.
Furthermore, a prolonged downturn in China’s real estate sector is forcing some to tighten their purse strings.
Thomas Ma, 41 years old living in Guangdong and recently unemployed, is one of these. Ma used severance compensation to pay off home, consumer, and car loans. He is also selling one of his three properties – an apartment priced at 500,000 yuan (nearly 1.75 billion VND). This number is much lower than the peak of 800,000 yuan (2.8 billion VND) someone paid a few years ago.
Ma still intends to invest in her children’s education but is looking for ways to cut down on daily expenses and limit all family trips. “The monthly cost of education for a middle school student is 4,000 yuan (14 million VND). I have two children,” Ma said.
An annual survey by financial economist Wu Xiaobo shows that the assets of 43% of the middle class aged 25-45 (those earning at least 200,000 yuan per year) will decline in 2023, making them cautious. more important in spending. The number of asset declines in 2022 is 31% and in 2021 it is 8%. Nearly 50% of middle-class respondents said travel accounts for the majority of their consumer spending in 2023.
Many analysts believe that a general lack of confidence in the real estate and financial markets is the reason why Chinese people are more hesitant to withdraw their wallets. Additionally, despite increased tourism consumption, the goal of relying on consumers to boost the national economy “is unlikely to be an easy process”. Especially since tourism is not always reliable for sustaining the local economy.
Yan Xu, deputy director of the Culture and Tourism Bureau of Zibo, a city famous for its grilled meat, admitted that the recent surge in tourist arrivals to the city will not last forever.
Even the top tourist-attracting cities are not reputable fulcrums, attracting large revenues for the tourism industry, according to analysts at a ranking agency in China – CSCI Pengyuan. The research team also pointed out that many destinations have had to rely on government subsidies instead of self-reliance on revenue. Li Xunlei, chief economist at Zhongtai Securities, is skeptical about China’s tourism recovery, after comparing this year’s week-long Lunar New Year tourist numbers with those in 2019. only 50% compared to before the epidemic.
“Don’t put your hopes on consumption growth this year because consumption depends on people’s income and debt repayment rate. These two indicators are not good,” Li said.