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Golden Week Boosts Sales in China

The country's retail sales experienced double-digit growth during the recent public holiday.

During Golden Week, millions spent the holiday traveling and shopping.

SHANGHAI — While China’s retail sales experienced double-digit growth during the recent Golden Week holiday, the country’s domestic tourism sector witnessed the biggest boom over the eight-day break, with record numbers of Chinese flocking to popular tourist destinations across the country.

Golden Week is a seven-day break at the beginning of October when millions of Chinese travel, as well as shop at retail spots to take advantage of discounts and other promotions. This year’s holiday was an extra day longer, as it coincided with Mid-Autumn Festival, a traditional Chinese celebration.

More than 34 million tourists visited 119 top destinations in China, representing an increase of more than 20 percent year-on-year, according to China’s National Tourism Administration. Tourism revenues at these destinations rose 25 percent. Domestic airlines carried more than seven million passengers, while railway passengers numbered more than 80 million, a 13 percent year-on-year increase.

 

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Nearly eight million traveled to Shanghai, a 21 percent increase from 2011, the city’s tourism office said. At least 13 million tourists visited Beijing. Outdoor activities, such as camping and hiking, as well as visiting historic sites, were popular activities, the tourism administration said.

Travel agencies said sales volume for outbound tour packages also increased dramatically. According to Spring Tour, one of China’s largest travel agencies that also operates a discount airline, sales for trips to Thailand increased 217 percent compared with the year before. Trips to Europe and the U.S. were up 30 and 80 percent, respectively. Tours to Russia rose 268 percent compared with 2011.

Despite the frenzied travel, domestic consumption was slightly more lackluster. Overall retail sales expanded 15 percent, a slight decline from the 17.5 percent growth over the same period in 2011, China’s Ministry of Commerce said. Sales in the retail and catering industries totaled 800 billion yuan, or $127 billion at current exchange, compared with nearly 700 billion yuan, or $111 billion, a year ago. Fritz Demopoulos, an investor in Mainland Internet and travel industries, said the domestic travel boom reflects the “rise of the Chinese leisure traveler” who is seeking out destinations in China that offer higher-quality services, premier accommodations, better restaurants and more exclusive activities.

“Five or six years ago, most of the high-end hotels [in China] were made up of foreigners. Now 50 percent are Mainland Chinese,” Demopoulos said, adding that domestic travel makes up about 90 percent of China’s tourism market. “Now we are seeing a shift. Mainland Chinese appreciate service, spas, guided tours and things like that. We see consumers spending on nice restaurants and nice hotels, and we are seeing more points of interest in China with that quality of service.”

Yet, Demopoulos added, the bulk of domestic travelers still settle for low-budget travel packages that do not include five-star hotels and gourmet dining.

In terms of consumer slowdown, Demopoulos said consumers are “more cautious.

“I think on a macro-level, we are all worried. Mass-market luxury products are a bit slower, although high-end luxury products are still going from strength to strength. Like anything in China, we tend to see mixed signals. My sense is we will continue to see quite a stable market,” he said.

Salespeople in cosmetics and clothing stores at a shopping complex in Shanghai said that while there were many shoppers, few actually bought anything. A salesman at a counter of the Hong Kong-based Luk Fook Jewelry said sales were up 40 percent over the holiday.

Alex Fan, head of research at ICBC International, said the growth rate “is in line with the overall economy.

“Obviously the growth rate is slowing down, yet it is in line with the overall macro economy,” he said. “But still, in terms of absolute growth, the rate is still stronger than overall retail sales in China.”

For the first half of 2012, retail sales rose 14.4 percent, with a real growth rate of 11.2 percent after adjustments for inflation, according to the state-run Xinhua News Agency. That figure was 2.4 percent lower than for the same period the year before. The country’s gross domestic product expanded 7.6 percent year-on-year in the second quarter of 2012, down 8.1 percent from the first quarter, Xinhua reported.

“Consumer sentiment is weak,” said Vincent Lui, a Hong Kong-based Boston Consulting Group partner.

A BCG survey tracking consumer sentiment in 2012 found that 34 percent of Chinese said they would spend less this year, while 37 percent said they would increase spending and 30 percent said their consumption would remain about the same. In 2011, about 24 percent of consumers said they would not spend as much. Consumer confidence is higher in smaller cities, the study found.

Lui said the survey, conducted in March, indicated that around 40 percent of consumers would not “trade up” for purchases in skin care and apparel categories. He added that the number of consumers not willing to spend as much this year is the “highest number in three or four years.”

“It is quite significant,” Lui said. “Definitely a lot of companies are bracing for a slowdown.”