HONG KONG, Jan 27 (Reuters Breakingviews) – China’s first big vacation of 2023 offers shallow relief to investors. Movie sales during the lunar new year holiday week surpassed last year’s to top nearly $900 million, per ticket provider Maoyan Entertainment (1896.HK). Travel is rebounding too.
The return of moviegoers and vacationers eased some concerns about the lingering economic impact of Covid-19. Officials dropped restrictions abruptly in December, and a massive outbreak duly ensued, but they now say hospitalisation rates for Covid peaked on Jan. 5. Government data logged 35 million passenger trips on Wednesday alone, 73% higher than in 2022. Cinema operators were top beneficiaries. IMAX’s China subsidiary (1970.HK), for example, grossed 42% more from the same period last year in the first four days of the holiday. Pleased investors pushed up Hong Kong’s Hang Seng Index (.HSI) to its highest level in 10 months on Thursday, the first day of trading in the Year of the Rabbit.
But three years of intermittent Covid lockdowns left scars, damaging household balance sheets, weakening confidence in the safety net and cultivating risk aversion. Median disposable income growth for Chinese urbanites has dropped to just 2% last year from 7% in 2021, and while the wealthy have been largely unscathed, there are also signs they are mulling emigration. Retail sales, a key measure of consumption strength, remain depressed, falling to a 1.8% contraction in December, and average growth rates have fallen back after a robust recovery in 2021, a year when life inside China had largely returned to normal.
Travel is still 40% down from 2019 levels, and consumers have gotten more frugal. Passenger car sales dropped 21% from the same festive period last year, per Nomura analysts, and real estate keeps plunging. Many movie theaters resorted to price cuts to boost traffic, per Maoyan.
Anecdotally, some mainland visitors in Hong Kong complained luxury good prices there aren’t competitive compared to the domestic duty-free shopping mecca Hainan province – bad news for other destinations like Tokyo and Paris.
Multinationals hoping for a dramatic recovery in Chinese spending are likely to be disappointed. Central bankers terrified that China’s reopening will fuel more global inflation will be relieved. Chinese consumers enjoyed their holiday but there was little sign of dramatic “revenge consumption.” Scarred consumers have too many reasons to avoid splurging for the foreseeable future.
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CONTEXT NEWS
Mainland China’s Lunar New Year holiday runs from Jan. 21 to Jan. 27 in 2023.
Hong Kong’s benchmark Hang Seng Index surged 2.37% to close at 22,566.78 on Jan. 26, the highest since March 2. Mainland China markets are closed until Jan. 30.
Editing by Pete Sweeney, Thomas Shum and Pranav Kiran
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