Golden Week Data Show China Headed For A Double Dip: Nomura

Consumption during China’s National Day and Golden Week worsened significantly, affirming forecasts that Beijing’s “zero-Covid” strategy and various demand and supply shocks are likely to result in another growth dip – the second after the initial major decline in the Covid-stricken first quarter last year, analysts from Nomura said on Friday.

During the week-long holiday this year, national domestic visits reached 515 million trips and tourism revenues totalled just over 389 billion yuan ($60.3 billion). Those figures were 29.9% and 40.1% below pre-pandemic levels, respectively, according to data released on Thursday by China’s Ministry of Culture and Tourism.

They indicate a significant worsening in China’s in-person services, Ting Lu, Nomura Hong Kong’s chief China economist, said in a note.

By comparison, national domestic visits and tourism revenues fell short of pre-pandemic levels by 12.8% and 21.4% only during the Mid-Autumn Festival (19-21 September) just last month.

“Compared with Golden Week data last year, most indices contracted. The only exception is movie box office [figures], thanks to an epic film recounting a battle in the Korean War,” Lu said.

“As an increasing number of nations choose to live with Covid, China’s zero-Covid strategy could be increasingly costly for the economy,” he added.

Homes Sales Plunge in Early October

The number of passenger trips during the holiday fell by 7.5% year-on-year, while new home sales declined by 37.6% in volume for the first six days of October from a year earlier, according to Nomura.

Baidu data showed expressways were less congested than last year.

Although retail sales grew slightly faster in September due to the release of pent-up demand following previous Covid-19 waves, the sluggish Golden Week data indicate that growth will likely slow again in October, Lu said.

This may add downside risks to Nomura’s below-consensus GDP growth forecasts, he added.

Prompted by China’s power crunch as a result of coal shortages and emissions controls enacted by Beijing, Nomura last month cut its year-on-year Q3 and Q4 GDP growth forecasts for China to 4.7% and 3.0%, respectively, from 5.1% and 4.4%.

It also cut the annual GDP growth forecast for 2021 to 7.7% from 8.2%.

Nomura expects Beijing’s ongoing emission controls, plus its “zero-Covid” strategy, and property sector curbs to lead to another quarter-on-quarter growth dip of 0.2% in Q3, after a 8.7% quarter-on-quarter decline in Q1 2020.

• By Iris Hong