Beijing boosts domestic consumption as Chinese New Year begins

The Lunar New Year holiday in China, which starts today, will provide a glimpse of whether recent efforts by central and local governments to boost consumption through subsidies are bearing fruit.

During the eight-day holiday, millions of people will travel to see family or visit domestic tourism spots. Long queues formed at railway stations towards the end of last week as some workers took additional leave to return early.

A teacher in her 30s working in Shanghai took a 14-hour train journey back to her hometown of Luzhou in the southwestern province of Sichuan on Friday. “I am looking forward to spending time with my family and relatives, mostly drinking, gossiping, and playing mahjong,” she told Nikkei Asia, noting that Luzhou is famous for its baijiu, or traditional hard liquor.

The earlier timing of the holiday compared to last year, when it started in February, was partly blamed for an unexpected contraction in China’s manufacturing activity in January, according to an official survey released on Monday. Still, the weak data “means that more needs to be done to help stimulate activity” through policy, HSBC said in a note on Monday.

The Chinese government expects a record 9 billion trips to be made between January 14 and February 22, a 40-day period when travel demand increases during the Lunar New Year, known as Chunyun. Although the government also predicted 9 billion trips last year, this figure represents a 7% increase on last year’s figures. Around 80% of journeys are expected to be made by car, while rail and air travel are forecast to reach 510 million and 90 million, respectively.

Local governments are developing rail networks across the country, making long-distance travel increasingly easier. Airlines are trying to compete during Chunyun with fares about 5% lower than last year, according to FlightAI, which tracks flight data, in a sign that frugal consumers are opting for the more affordable rail option.

Some shopping malls put up signs promoting the government’s subsidy program for household goods and cars launched last year. At a shopping center in Shanghai, a store selling Toshiba home appliances advertised discounts of up to 35%. E-commerce apps such as Taobao and JD.com set up special “government subsidy” sections and displayed banners saying products would be shipped as usual during the holidays.

Earlier this month, the government announced it was providing an additional 81 billion yuan ($11.1 billion) for the program, adding smartphones, tablets, and smartwatches.

Local governments are also offering discount coupons for cinema tickets, hotels, and other consumer activities. According to Chinese media, cinema ticket sales from January 28 to February 4 reached 736 million yuan, already surpassing last year’s bookings. This follows a dismal 2024, when box office sales fell 23% year-on-year.

Investors expect the government to implement additional policies following the announcement of official fiscal targets at the National People’s Congress in March. In a sign of relatively low expectations for generous New Year spending, shares of baijiu producer Kweichow Moutai have fallen 6% since the start of the year.

“Baijiu’s current sales volume is still low compared to the same period last year,” local brokerage Pacific Securities wrote in a recent report. “However, the decline has narrowed compared to the Mid-Autumn Festival and National Day holidays in 2024,” it added.