Economy, Talking Point

Week spending

What happens when 1.3 billion people get the week off? They travel and shop

Week spending

Aloha: Chinese tourists on Hainan island get in the holiday mood

The French commitment to liberte, egalite and fraternite is a famous one.

Some now claim that “holiday” would make for a topical addition to the nation’s republican birthright. Certainly, a mandatory minimum of 35 days off a year stirs envious mutterings elsewhere.

Nowhere is this holiday heaven more evident than in Paris in August, when the locals depart the city in droves. That means they are leaving just as the tourist season hits top gear, of course. Not that the tourists seem to mind – for many, it’s the ideal arrangement.

Still, the exodus is small fry compared to what is going on in China this week, when 565 million locals are expected to be on the move, according to Xinhua.

That’s at least 45 times the traffic that brings British roads to a standstill every summer bank holiday, or more than 15 times the number of Americans that chose to travel during this year’s Fourth of July celebrations.

When ‘Golden Week’ begins, no other holiday migration compares.

Do the Chinese get much vacation time?

Most companies offer five days of personal leave after a full year of employment, which then increases with tenure.

But for most Chinese, it’s the additional 11 days of public holiday each year that count for the majority of vacation time. They are also the days that calibrate the holiday mood nationwide.

The schedule is a fixed one, even if some of the specific dates vary according to the lunar calendar. So January (or February) the Lunar New Year, April for Qing Ming, May for Labour Day and the Dragon Boat Festival, and the period beginning this week for the Mid-Autumn Festival and National Day.

The real blockbusters are the two extended breaks around National Day and Chinese New Year, which are known as the ‘Golden Weeks’. This is when holiday traffic hits the high tide mark, bus and railway stations are clogged to capacity, and much of commercial and official China grinds to a halt.

This must all have an economic impact?

Yes, it does. And that was the plan when the Golden Week schedule was devised in 1999.

The longer breaks were designed to give migrant workers a little more time for an annual trip home. But the primary motivation was an economic one. These are holidays created as opportunities for shopping and spending.

Many holidaymakers have taken the bait. Tourism authorities expect Rmb100 billion ($14.6 billion) to be spent on travel during the current holiday, for instance, the large majority within Chinese borders.

With 200 million travelling as tourists, this works out at close to Rmb500 ($73) per person per trip, says the Global Times. It doesn’t sound like much but it should be enough to cover two or three nights away for millions.

Retailers also look forward to the holiday frenzy. The Ministry of Commerce reported sales in excess of Rmb420 billion ($61.3 billion) for the corresponding week last year, up a fifth on the year before. That was about four times the weekly average, WiC estimates. This year should be even better, as the fiscal stimulus is boosting consumer spending and household confidence.

Of course, the overall impact on economic growth is more mixed. Many factories mothball production for the duration of the break. Businesses close too. But for economists keen to see the colour of China’s money, the Golden Weeks offer a glimpse of a potential future, and a hope that the seasonal spending might spill over into more sustained demand. This would help reduce the reliance on investment and exports for growth, which has implications for the rest of us in the global economy.

But not everything has gone to plan?

If anything, the policy has been too successful. An estimated 28 million Chinese opted to travel during the first national holiday week announced a decade ago. That number is up twenty-fold this year.

So the weeks often end up more gridlocked than golden.

The railways are the worst hit by the travel chaos, especially at Chinese New Year when wintry conditions add to passenger misery.

The critics argue that the disruption is leaking into the wider economy too. Trade flows drop when government agencies shut up shop for the holidays. Investors complain that local bourses are closed for too many days, which makes share prices more volatile.

How much of the holiday spending spike is genuinely incremental isn’t clear either.

Some of the shoppers caught up in the holiday mood are thought to rein back their expenditure in the weeks following. Sales in the post-holiday period now rely heavily on discounts – known locally as dao zai cong (literally, ‘falling head first’) .

The government seems to agree that there have been unintended consequences.

So the May Golden Week was dropped last year, and in its place one day festivals – such as Qing Ming – were sprinkled through the calendar. These have less of an impact on productivity.

But holidaymakers are happy?

They may be getting more days off, but many Chinese complain about the rising cost of enjoying them.

It doesn’t help that Golden Week is a price-gougers’ paradise.

Airlines, train and bus companies, hotels and visitor attractions all ramp up charges in anticipation of the tourist deluge. Peak prices come in at least 50% above normal, says the China Daily.

The newspapers have been busy seeking out the worst cases, including the Rmb100 bowl of holiday porridge at Shanghai International Airport and the series of scenic spots apparently intent on fleecing their visitors with higher ticket prices.

Top of the list is a famous waterfall in Guizhou province, which has doubled its entry fee.

It’s all a golden opportunity for cashing in, it seems.

© ChinTell Ltd. All rights reserved.

Sponsored by HSBC.

The Week in China website and the weekly magazine publications are owned and maintained by ChinTell Limited, Hong Kong. Neither HSBC nor any member of the HSBC group of companies ("HSBC") endorses the contents and/or is involved in selecting, creating or editing the contents of the Week in China website or the Week in China magazine. The views expressed in these publications are solely the views of ChinTell Limited and do not necessarily reflect the views or investment ideas of HSBC. No responsibility will therefore be assumed by HSBC for the contents of these publications or for the errors or omissions therein.