Despite a nearly 48% increase in the number of people returning to their hometowns for the Lunar New Year (LNY) holiday compared to the same period last year, a contraction in movie box office sales and tourism revenues — due perhaps to the worsening economy — suggests that this did not result in materially higher consumption demand. Property sales, heavy truck sales and operating rates of some key manufacturing sectors deteriorated further in January.
Despite Beijing’s call to front-load supportive measures at the start of this year, we believe GDP growth could slow further in the first quarter.
Credit growth, measured by the year-on-year growth of outstanding aggregate financing, might pick up after regulators in Beijing urgently prodded banks to ramp up lending in the final week of January, but we expect to see more real and more supportive measures only after the annual National People’s Congress conference in early March.
Key data and facts for LNY Golden Week
• Covid-19 developments
Despite the LNY travel rush and the 2022 Beijing Winter Olympics, which formally kicked off on Feb. 4, the number of new Covid cases declined in the past week. The National Health Commission reported a daily average of 22 domestic new cases during the LNY holidays (Jan. 31 to Feb. 6), a sharp decline from the 100-plus daily local cases during much of January. However, the current situation in Hong Kong is quite concerning, where daily new cases have reached a record high of almost 300.
During the LNY holiday, a total of seven provincial-level regions reported local Covid cases: Zhejiang, Hebei, Guangdong, Guangxi, Hunan, Tianjin and Beijing. As of 11 p.m. on Feb. 6, according to the Chinese government’s website, Beijing, Tianjin, Guangxi and Zhejiang still have districts labeled as “high-risk,” whereas Guangdong, Tianjin, Shanghai, Beijing, Xinjiang, Yunnan, Hebei, Heilongjiang, Guangxi and Zhejiang still have districts labeled “medium-risk.”
Zhengzhou, the capital city of Henan province, experienced multiple Covid outbreaks in January, including an omicron wave in the city of Anyang, but on Feb. 5, it formally re-opened inter-provincial public transport, since the province no longer has any district designated as medium- or high-risk.
• Mobility
According to the Ministry of Transport, the total number of passenger trips via major types of transport (i.e., roads, railways, waterways and civil aviation) during the first part of the LNY travel rush (Jan. 17 to Jan. 31, when migrant workers normally return to their hometowns) were 47.6% above the same period in 2021 but still 64.6% below the same period in pre-pandemic 2019, on a lunar calendar basis. During the weeklong LNY holiday, overall passenger trips were 33.4% above the same period in 2021 but 68.8% below the same period in 2019.
The Baidu Migration Index (BMI), which consists of location records for every smartphone owner using Baidu Maps — a Chinese equivalent of Google Maps — and other apps using its location-based platform, also suggests the overall return rate of migrant workers to their hometowns before and during the LNY holiday this year was significantly higher than that of last year. More specifically, the daily average of the BMI during the LNY holiday was 53.6% above the same period in 2021 but still 13.8% below that of 2019. However, we caution that the BMI may overestimate the return rate of migrant workers to their hometowns, as short distance travel from major cities to the suburbs may have been miscounted as migrant workers returning to their hometowns by the BMI.
We see two reasons on why more people returned to their hometowns for the LNY holiday. First, we believe there was substantial pent-up demand, as most people were ordered not to return to their hometowns a year ago by authorities. Second, Beijing has shifted to a more flexible “dynamic” zero-Covid strategy, at least regarding its policy on mobility during the LNY holidays.
• Tourism
According to the Ministry of Culture and Tourism, during the LNY holiday Golden Week, domestic visits and tourism revenues were at 251 million and 289 billion yuan ($45 billion), respectively, 2% and 3.9% below the same period in 2021. Compared with the same period in 2019 (pre-pandemic levels), domestic visits and tourism revenues were 26.1% and 43.7% lower. One silver lining is the booking of ice-and-snow tourist services, which was 68% above the same period last year, as the Beijing Winter Olympics has encouraged many to visit the snowy regions of the country.
• Cinema box office sales recorded a material decline from last year
The LNY holidays have traditionally been the most important time of the year for China’s film industry, particularly for cinemas in lower-tier cities, where sales are usually boosted by the large number of people returning to hometowns for LNY celebrations.
According to data compiled by Taopiaopiao, a film industry data provider, the total box office sales for the 2022 LNY season were 6 billion yuan, 23.2% below the sales in the same period last year. Compared to LNY holiday sales in 2019 — the last LNY holiday season prior to Covid-19 — total sales were up marginally by 2%. This sharp year-on-year decline in sales this year was partly attributable to a high base, while the large surge in box office sales from last year was mainly due to the release of pent-up demand after the initial wave of Covid-19 the previous year, during which LNY box office sales were almost entirely wiped out. An additional factor was that Valentine’s Day also took place during the LNY holidays last year, which further boosted box office sales.
Given the cinema capacity restrictions under Covid containment policies, concerns about ongoing Covid waves and the generally weak consumption demand, last year’s box office sales level appeared simply unsustainable. Furthermore, average ticket prices during this LNY holiday reached an all-time high of 53 yuan per ticket, an 8.4% year-on-year increase from last year and stronger than the historical trend, which points to even weaker year-on-year growth of movie box office sales in real terms. Anecdotal evidence shows that cinemas may have intentionally raised ticket prices in anticipation of much softer sales than last year, in order to compensate for the expected loss in profits.
• The property sector deteriorated in January
New home sales in volume terms are usually quite low during LNY holidays, therefore we just focus on monthly growth based on the Gregorian calendar. According to data compiled by Wind Information, we estimate that new home sales (by floor space) in 30 major cities worsened to a 30.2% fall in January from a 21.9% year-on-year drop in December. According to China Real Estate Information Corp. (CRIC), a leading provider of real estate information, the top 100 developers reported a year-on-year sales decline of 41% (by value) in January, compared with a 38% drop in December. Another report released by CRIC indicates that listed developers purchased only 17 billion yuan of land from Jan. 1 to Jan. 25, 93% below the same period last year and the weakest January print since 2010.
Lu Ting is chief China economist at Nomura Holdings Inc.
Wang Jing and Harrington Zhang are China economists at Nomura Holdings Inc.
This article has been edited for length and clarity.
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