Spending brightens rebound hopes

Diners line up for snacks at a restaurant in Hefei, Anhui province, on Jan.26, 2023. [RUAN XUEFENG/FOR CHINA DAILY]

Robust recovery in consumer spending in China during the Spring Festival holiday in late January has brightened hopes that the release of pent-up demand will inject strong impetus into the country's economic rebound, experts said on Tuesday.

They commented after new data showed that consumer spending picked up steam across the board during the holiday, when sales of retail and catering enterprises monitored by the Ministry of Commerce expanded by 6.8 percent year-on-year.

The ministry said on Tuesday that it will put resuming and expanding consumption high on its agenda this year after holding a work meeting. It also pledged stepped-up efforts to stabilize foreign trade and attract more foreign investment.

During the weeklong holiday, domestic tourism revenue rose 30 percent year-on-year to 375.84 billion yuan ($55.62 billion), or 73 percent of the level seen in 2019.Cinemas witnessed a year-on-year growth of nearly 12 percent to 6.76 billion yuan in their box-office receipts, official data showed.

"The data indicate that after COVID control measures were optimized, demand for consumption and travel rebounded strongly. All it takes is more time to return (to pre-pandemic levels)," said Shao Yu, chief economist at Orient Securities.

Sean Taylor, chief investment officer for Asia-Pacific at DWS, an asset manager, said pickup in consumption and a revival in services will drive China's economic growth this year, which may accelerate to about 5 percent and underpin further price gains of Chinese equities.

With hopes of a consumption-driven economic recovery on the rise, foreign capital inflows into onshore consumption stocks have sped up. Chacha Food Co Ltd, for instance, has seen its foreign ownership reach the ceiling of 28 percent in early January as foreign investors snapped up shares of the Shenzhen-listed food producer.

After three years of COVID-related disruptions, there is "strong pent-up demand for consumption", Taylor said.

"Households had saved significantly more during this period and were now waiting to be able to consume more again."

Data from the People's Bank of China, the country's central bank, showed that renminbi-denominated savings owned by households have risen by 17.84 trillion yuan last year, far more than the rise of 9.9 trillion yuan in 2021, igniting discussions that excess savings may translate into more spending.

Nevertheless, experts noted that China's consumption recovery is still incipient with big-ticket spending lagging, and concerted policy steps are needed to anchor household income expectations and boost their willingness to spend.

Lou Feipeng, a researcher at Postal Savings Bank of China, said while spending in such sectors as travel and culture has rallied sharply, the recovery of big-ticket items such as homes and automobiles has yet to be full-blown.

Passenger car retail sales, in volume terms, dropped 21 percent year — on-year in the first 15 days of January, versus a 3 percent growth in December, according to data compiled by analysts at Nomura.

Lou underlined the need for more policies to boost the consumption of automobiles as a relevant tax cut policy expired at the end of last year, while reasonable financing activity generated by demand for upgraded housing should be better supported.

The State Council executive meeting on Saturday urged measures to accelerate the recovery of consumption as the main economic driver, and called for policies promoting the consumption of cars and other big-ticket items to be fully implemented.

As for stabilizing housing-related spending, Shao with Orient Securities said the policy focus can be placed on satisfying housing demand of newcomers to cities, via measures such as providing housing subsidies or easing some restrictions on home transactions.