China’s Labor Day Tourist Spending Plummets on Covid Curbs

(Bloomberg) -- Chinese travel and spending plummeted over the national Labor Day holiday as the government's stringent Covid Zero restrictions and fear of infection kept people at home.

Tourist spending over the five-day vacation was 64.7 billion yuan ($9.8 billion), down 43% from last year, the Ministry of Culture and Tourism said. The number of domestic tourist trips over the break fell to 160 million from 230 million last year, it added.

Other data showed sharper declines in mobility and spending. There were 16 million rail trips taken over the vacation which began Saturday, down 80% from 78.5 million last year, according to preliminary estimates reported by state-media. Nationwide cinema ticket sales over the period fell 81% to 297 million yuan from 1.6 billion last year, according to Maoyan Entertainment.

The data highlights the impact China's efforts to halt the spread of the omicron variant of coronavirus has had on the world's second-largest economy. Authorities locked down major hub Shanghai in late March, with millions of people still confined to their homes.

The slump in spending will drag down services activity in May, which already contracted last month along with manufacturing, according to official data. The independent Caixin services purchasing managers index for April dropped to its lowest level since February 2020, when China was experiencing its first coronavirus outbreak.

In Beijing, restrictions were tightened over the Labor Day break to contain a Covid-19 outbreak. Residents face repeat testing and have been barred access to public places without a negative result. The city also shut more than 60 subway stations on Wednesday.

Key parks in Beijing received a total of 4.8 million tourists during the five-day holiday, down 38% from a year ago, according to the municipal government.

More people chose to stay close to home for the holiday. Local travel orders during the period accounted for 40% of total orders, Trip.com Group Limited data showed, over 10 percentage points higher than the same period in 2021. The average hotel price per night dropped by 50% on year during the holiday, according to Tongcheng Travel.

Government officials estimated ahead of the Labor Day break that passenger traffic over the holiday would plunge 62% from last year. They expected road traffic to drop by half while travel by plane could slump 77%.

Nomura Holdings Inc. estimates that 43 cities are under partial or full lockdown, or are facing some district-level restrictions, affecting about 328 million people.

“Despite falling caseloads of Covid, there is no sign that this omicron wave will be over soon, and the Chinese government is still quite determined to hold onto its Zero Covid strategy,” Nomura economists wrote in a note.

The Communist Party's Politburo, its top decision-making body, pledged last week to meet its economic targets, promising to boost stimulus and speed up investment in infrastructure.

Despite those signals, Nomura said it remains “deeply concerned about growth, as we believe the omicron variant and the Zero Covid strategy represent the dominant challenges to growth stability.”