Can a 'super’ golden week pull China's economy out of its hole?

China has long been in an economic slump.

The country has seen its economic growth slowing as consumer demand remains weak. Meanwhile, its real estate giants have been sinking, local governments are struggling for cash and President Xi Jinping is cracking down on officials.

All this comes in the backdrop of a tariff tiff with the United States that continues to loom. But now, Beijing is relying on its ‘super’ golden week – which occurs from October 1 to October 8 every year – in the hope that it will pull the country out of its morass.

China in September unveiled a slew of stimulus measures which it hoped would expand its services sector and boost consumption.

But what do we know?

Let’s take a closer look:

The ‘golden week’

This is a seven-day holiday that commemorates the founding of the People’s Republic of China in 1949. The holiday, which usually occurs in October, sees millions of people travelling across the country every year.

The Ministry of Culture and Tourism has said over 12,000 cultural activities will be held across China including over 300 large-scale light shows and over 500 intangible cultural heritage exhibitions.

This is arguably the peak travelling season for most people in China. Several grand events are held across China, particularly in the capital Beijing, to mark the occasion. The week usually sees tourist attractions, airlines and hotels increase prices.

“This year’s National Day holiday coincides with the Mid-Autumn Festival, creating the longest holidays of the year, and residents’ willingness to travel may reach a new high,” Zhang Yi, CEO of iiMedia Research Institute, told the Global Times  

The ‘super’ golden week, which begins tomorrow (October 1), is more important than usual given the state of China’s economy. Officials say millions of people are set to travel across China. In fact, authorities have quoted the Ministry of Transport as saying that approximately 2.36 billion passenger trips will take place during the eight-day period.

“The eight-day holiday will see strong and diverse travel demand , whether for family visits or tourism," Vice Transport Minister Li Yang has said. Li said the average daily trips could touch around 295 million – an increase of 3.2 per cent from last year. Li said most people, around 80 per cent, will drive to their holiday destination.

Li said travel is likely to peak on Wednesday with over 340 million passenger trips and again on October 7 and 8 when people make their way back home. Li said tourism demand remains robust, with cities including Shanghai, Beijing, Chongqing, and Chengdu in Sichuan province the go-to destinations within the country and Japan, South Korea and Southeast Asia abroad.

“Holidays are not only peak spending seasons but also key windows for unlocking consumer potential. Service consumption is expected to be greatly boosted by the holiday - from movies and concerts to operas and night-time activities,” Jiang Yiyi, a tourism and sports expert at Beijing Sport University, told the Global Times.

What the government is doing

The government will be keeping a close eye on consumer spending throughout the week in hopes of reviving the local economies. The government and cities are attempting to bolster consumer sentiment via a range of measures. Some cities are giving out coupons to buy cars, to use on dining, tourism, and cultural venues, while the government has ordered museums and cultural centres to remain open longer and has organised sporting events.

The government wants to know if consumer sentiment is set to rebound and whether its stimulus measures are actually reviving the economy. It hopes that an increase in spending coupled with its stimulus measures could result in consumer-oriented stocks rebounding.

If consumer demand improves, consumer and service companies that have recently suffered – those in the hospitality, auto and service sectors – could rebound too. Which in turn could attract fresh interest from those at home and abroad.

China’s Ministry of Commerce in September announced almost two dozen measures to boost consumption in the fields of cultural tourism, entertainment, elder care, sports and health.

This included investing in service infrastructure, asking its financial institutions to lend more, allowing foreign and private players into telecoms and high-end medical care, holding international sporting events within the country, easing its visa and tourism policies and advertising China as a leisure and luxury destination.

Chinese factory activity continues slump

This comes as China’s factory activity extended its decline into a sixth straight month in September – the longest such slump since 2019. The official purchasing managers’ index (PMI) rose to a six-month high of 49.8 in September versus 49.4 in August but remained under the 50-mark.
Experts have said subdued domestic demand is hurting the outlook for Chinese factories while uncertainty around US tariffs is creating risks for exporters. They think producers are likely waiting for further stimulus to boost sentiment.

Meanwhile, a boom in exports is cooling off after companies rushed to ship products to get ahead of Trump’s tariffs. On the other hand, the Trump administration has tightened export controls on Chinese companies. New rules also affect subsidiaries of entities blacklisted by the US government.

The prolonged slump underlines the twin pressures on China’s economy: domestic demand has failed to mount a durable recovery in the years since the pandemic while US President Donald Trump’s tariffs have squeezed Chinese factories as well as overseas firms that buy components.

Chinese leader Xi Jinping phoned Trump on September 19 for the first time in three months, and while the call appeared to ease tensions, it remains unclear whether it yielded the expected agreement on popular short-video app TikTok, which analysts see as key to a broader trade deal.

Disagreements on technical details appeared to be weighing on negotiations, as Chinese and US trade officials met again last Thursday to revisit issues discussed in talks before this month’s Madrid summit, where a framework for a TikTok deal was reached.

Zichun Huang, China economist at Capital Economics, is “sceptical that economic growth is on the cusp of a sustained rebound.”

“Overcapacity remains a problem and the output price components declined, suggesting deflationary pressures remain entrenched,” she said.

However, it must be noted that a separate private-sector survey of factory managers has shown different results. The survey indicated the fastest expansion since March on the back of new orders, accelerated production growth and an uptick in new export orders.

Is this an aberration or a sign of something bigger? Only time will tell.

With inputs from agencies