Chinese consumers weather trade war in 1st big holiday test

Chinese consumers persevered at malls and restaurants during one of the country’s busiest holiday periods, though sentiment remains shaky against the backdrop of a new trade war with the U.S. Retail and catering sales expanded at a slower pace relative to last year with an increase of 6.3% during the Labor Day break, the Xinhua news agency reported today, citing data from the Ministry of Commerce. China’s program to subsidize purchases of new consumer goods probably contributed to double-digit gains for home appliances, cars and telecommunications equipment. Tourist spending lags pre-pandemic level The five-day holiday is also a popular time to travel. Spending per tourist reached 574 RMB ($79), up modestly from a year earlier but still 10% below the same period in 2019 before the Covid pandemic, according to Bloomberg calculations based on figures from the Ministry of Culture and Tourism. The mixed results illustrate the challenges Beijing faces in relying on domestic consumption to counter the shock of U.S. tariffs on the economy. Households show little sign of abandoning their thrifty ways, with confidence still subdued as a result of deflationary pressure and a yearslong property slump. “The preference for cost control continues to show that there’s still room to improve sentiment,” said Lynn Song, chief Greater China economist at ING Bank NV. “I don’t think it will reduce the urgency for stimulus as it is just one data point, and many of these holidays may have been booked before the tariff escalation.” Consumer confidence remains fragile The health of the consumer economy is in focus a month after U.S. President Donald Trump imposed tariffs of as high as 145% on Chinese products. The Chinese authorities have been counting on stronger domestic demand to head off damage to the economy from an expected plunge in exports. But the strategy is likely to face obstacles, especially if the labor market comes under stress from layoffs in industries exposed to exports. Already, official data indicated that employment in the manufacturing sector contracted last month at the worst pace since February 2024. The slowing momentum was also evident during the break that ended yesterday. Economists at Goldman Sachs Group said the level of tourism revenue per person is among signs “pointing to persistent deflationary pressure and continued consumption downgrading.” Entertainment spending takes significant hit Moviegoers trimmed spending as well, with the box office reaching 747 million RMB — less than half last year’s total — according to figures compiled by online ticketing platform Maoyan Entertainment. Excluding the pandemic years, the haul was the lowest for any Labor Day holiday since 2016. While the trade-in program turbocharged sales for products such as mobile phones, it’s likely demand will suffer once people become less enthusiastic about government subsidies. Still, the takeaway for some analysts is that consumer spending is holding up well, for now. “Despite the significant challenges from increased U.S. tariffs, growth momentum in the hospitality sector strengthened during the Labor Day holiday compared to previous long holidays,” Goldman economists including Andrew Tilton said in a report.

Chinese consumers weather trade war in 1st big holiday test

On this page

Published May 06, 2025

Sectors

Insights

Company

Chinese consumers weather trade war in 1st big holiday test