China's consumer confidence gets its first test after stock market rally: key data from National Day Holiday
Stock markets on the rise: what's next?
For many in China, the 2024 National Day holiday is set to be a memorable one. The most aggressive stimulus measures recently introduced, including monetary policies and cuts to mortgage rates, were implemented just days before the seven-day holiday from Oct 1 to Oct 7. The swift actions since September 24 has reignited hopes among both consumers and investors.
The stock market experienced a dramatic surge, with trading volume skyrocketing to record highs, even causing the Shanghai Stock Exchange to briefly break down on September 27. The unprecedented bull run brought long-awaited optimism for Chinese equities. While the onshore market was closed during the National Day holiday, the Hang Seng Index still rose by 9%, with the Hang Seng Tech Index increasing by 13% during the National Day holiday this year.
While this optimism is a welcome change after the persistent pessimism in the equities market since the pandemic, we must ask: what comes next, and can this positive momentum be sustained?
Volatility is expected to linger high as hope for additional fiscal packages meets unannounced details and timelines. (We should expect more information in October's NPC Standing Committee and Politburo meetings later this year.)
While we can enjoy this short-term rally, it’s important to note that the current bull market is driven by valuation recovery rather than actual corporate profit growth. As the valuation recovery finishes, the medium- to long-term outlook will depend on key fundamentals, especially real estate sales, domestic demand data, and corporate earnings and profits.
The National Day holiday is the first major test of household confidence following recent stimulus measures. Could easing mortgage rates improve cash flow for households to spend? Will the bull market directly impact consumer confidence? Let’s take a look at some first-hand data points in today’s newsletter to gain insight into the current state of household confidence.
In next week’s newsletter, we’ll share our proprietary data on equities in the consumer and internet sectors that still show potential.
Overall observation: Domestic tourism revenue rises, driven by volume, as consumers maintain responsible spending
During the 7-day National Day holiday, total visitation and tourism revenue increased by 5.9% and 6.3% year-on-year, respectively, on a pro-rata basis compared to the 8-day holiday in 2023. Both visitation and revenue surpassed pre-pandemic levels in 2019.
However, per-person spending in 2024 and 2023 has remained slightly below 2019 levels, suggesting that consumers are holding back on "revenge shopping" and opting for more responsible spending.
Data from OTA platforms shows that domestic flight and hotel booking prices have also decreased:
Domestic Flights: The Civil Aviation Administration reported 16.1 million air passengers during the National Day holiday, an 11% year-on-year increase. However, Flight Manager (Chinese flight booking OTA platform) data shows the average domestic economy ticket price fell 15.1% to ¥845.
Hotels: Ctrip.com saw a strong rise in daily hotel and homestay bookings. Meanwhile, Qunar reported high-end hotel prices dropped 15%, while Fliggy data indicated overall hotel prices fell 4.5% compared to 2023.
The "slow-charging style 慢冲式" vacation gains popularity
The drop in hotel and flight prices isn't solely due to cautious consumer spending. A notable shift this year is the rise of the "slow-charging" vacation style—a Chinese internet slang for a relaxed, spontaneous approach to travel. This contrasts sharply with last year’s intense “special forces style 特种兵” travel, where the goal was to maximize time and visit as many places as possible in a short period.
More spontaneous: Ctrip.com reports the average booking lead time for the National Day holiday dropped from 6.8 days in 2023 to 6 days in 2024.
Shorter and more flexible road trips over long flights: More people are choosing road trips over flights, with the Ministry of Transport estimating that over 80% of travelers opted for self-driving during the holiday. Ctrip saw double-digit growth in car rentals, with Gen Z born after 2000 bookings up 115%.
Asia's 5-hour flight destinations remain popular for outbound travelers: Data from Flight Manager shows continued improvement in outbound travel: Between October 1-6, 2024, the average daily number of international and regional flights (to Hong Kong, Macau, and Taiwan) increased by 50.1% and 6.4% year-on-year, recovering to 83.5% and 71.8% of 2019 levels. This represents further growth compared to the Labor Day and summer holidays this year.
Asia destinations such as Japan, Thailand, South Korea, Malaysiam and Indonesia remains the top destination for outbound travelers, as consumers continue to favor trips offering better value for money and manageable, relaxing travel distances. OTA platform Ctrip.com reports that during the National Day holiday, airfares for short-haul flights from China to countries like Thailand, Singapore, and Malaysia have already returned to 2019 levels. [Source]
Major trend 1: Big cities and small towns swap
Big-city residents prefer small towns: Lower-tier and less famous destinations have become top choices for travelers from major cities. According to Qunar, keywords like "fewer people," "niche," and "reverse travel" have seen the fastest rise in search popularity. Hotel bookings in counties and smaller cities have surged, particularly for premium hotels, which are expected to see a 50% increase.
Small-town residents embraces overseas travel: Residents of fourth- and fifth-tier cities have become a new growth driver for outbound travel. Ctrip reports that during the National Day holiday, daily outbound bookings from 4th and 5th cities doubled and tripled year-on-year, respectively. Qunar data shows that over 600 smaller cities and counties residents flew for the first time during the holiday, with first-time flight bookings up over 50%. Outbound orders from these areas increased nearly threefold, outpacing those from major cities. [source]
Just as big-city residents sought outbound travel and iconic attractions in metropolitan areas two decades ago, this trend is now resurfacing in lower-tier cities. This shift reflects broader changes we've observed in other consumer sectors. Meanwhile, urban dwellers are increasingly pursuing "experiential" travel that features upgraded services and cultural offerings. It will be increasingly common to see urban consumers spend "big money" to experience simple activities like apple picking in the countryside.
Major trend 2: GenZ becomes the driving force of tourism
Despite high youth unemployment (for age 16-24), many young people are embracing a YOLO mindset (“you only live once”), as they are free from the responsibilities of mortgages and families. On Ctrip, Gen Z (born after 2000, excluding 2005+) now makes up nearly 20% of bookings, surpassing those born in the '80s and '90s to become the primary consumer group in tourism.
Interest-driven and cultural travels are now driving real tourism revenue [source]:
Keywords like "anime二次元" and "goods 谷子" (refers to anime merchandise) on Ctrip have seen a 120% month-on-month search increase. (I personally saw dozens of young adults and teenagers in cosplay groups every day during my 3-day trip to Chengdu). This trend benefits companies like PopMart (9992.HK) and Bandai Namco (OTCMKTS: NCBDY), which have strong IP assets that are popular among Gen Z, as I've previously discussed.
Cultural and historical attractions are seeing a surge in interest. Meituan data shows searches for "ancient architecture and temples" increased 126% during the holiday. Tongcheng Travel reports that the Xiaoxitian site in Shanxi, popularized by the game Black Myth: Wukong, saw a 20-fold year-on-year increase in tourism. Museum tourism also surged, with a 263% rise in search interest, and long lines forming at museums nationwide.
Major trend 3: Policy stimulus showing results
China's efforts to boost domestic consumption through measures like home appliance trade-in programs and cash vouchers are starting to pay off.
Restaurant and catering demand surge: Meituan data shows that during the first five days of the National Day holiday, daily in-restaurant dining consumption increased by 33.4% compared to 2023. Haidilao (6862.HK) restaurants in major tourist cities like Beijing, Xi'an, Shanghai, Guangzhou, and Shenzhen saw their highest single-day traffic of the year, with some locations setting all-time records. In Shanghai, where a 500-million-yuan voucher program was launched, restaurant spending saw double-digit growth, according to the Shanghai Municipal Commerce Commission.
Home appliance sales boom: Benefiting from home appliance trade-in programs, China's State Taxation Administration reported that during the National Day holiday, daily sales revenue in consumer-related sectors rose by 25.1% year-on-year. Sales of household appliances and audiovisual equipment saw a massive 149.1% increase.
Real estate
The real estate market, the biggest risk to household consumption confidence, received a major policy boost just before the National Day holiday. Since September 24, various cities in China introduced new easing measures, including lowering mortgage rates for existing home loans and reducing down payment requirements. Additionally, various first-tier cities relaxed home purchase restrictions and social security contribution requirements. Combined with a strong equity market performance leading up to the holiday, this created a positive policy environment and boosted market optimism.
Our tracked panel of 140+ cities across China shows a significant rebound in the existing home market.