Chinese GDP is expected to take a hit even in 2023 as the Mainland continues to stress of the “Zero-COVID” policy – tourism demand to provide a breather.
Lockdowns in China have caused a massive drop in the nation’s GDP in 2Q22.
“As long as China persists with its ‘zero-COVID-19’ policy, GDP growth will likely remain weak,” Preston Caldwell, Chicago-based Head of U.S. Economics and Chair of the China Economics Committee at Morningstar and author of the report, remarked.
Caldwell is of opinion that, ”We do not think China will pivot from the zero-COVID-19 strategy in 2022, however, we do expect a move away from zero-COVID-19 in 2023 as the economic toll continues to mount.”
Amidst the gloomy scenario, a ray of hope is seen in the tourism sector of China.
“Tourism sector accounted for around 11% to the Chinese GDP and 10% of national employment in 2019,” the Fitch rating report read.
Tourism – Slow Uptick
China’s relaxed Covid-19 pandemic-related travel restrictions and more targeted pandemic control measures have fuelled a rise in tourism demand, despite ongoing scattered outbreaks, says Fitch Ratings.
Fitch report says, of expecting a recovery in tourism spending in 2H22, from a trough in 1H22, although the extent and pace is likely to be uneven across regions and tourism companies.
The measured restrictions have seen the tourism sector rebound strongly in July, with tourist numbers jumping by 62.2 percent month-on-month, according to official data.
The daily average tourists hosted by Xinjiang’s 5A-level scenic areas skyrocketed to 110,000 in July, against 19,000 in May, while Yunnan’s Dali city, a famous tourist spot, attracted 6.9 million tourists, a 46 percent jump from pre-pandemic level in 2019, the Fitch report read.
Fitch report stresses on the fact that, recent virus outbreaks in some tourist destinations, including Hainan, Xinjiang and Tibet, will have limited impact on the summer travel market, as these markets contributed anywhere between 0.7 to 3.3 percent of the total national tourists in 2019.
“We also expect travellers to seek alternative holiday routes for the remainder of August. However, the pace of recovery is likely to be remain uneven across regions and we believe performance improvement will vary among tourism companies, with scenic spot operators continue to exhibit the most volatility,” Fitch report read.
Short-haul travel providers should continue to recover steadily, benefiting from changed travel patterns towards nearby trips amid the pandemic, the Fitch report emphasized.
One of the strong indicators is that domestic hotel bookings of Trip.com Group Limited, China’s leading online travel agency, have almost fully recovered to 2019 levels since 4Q21, driven by strong growth in short-haul travel, the Fitch report read.
In a scenario of headwinds resisting investment and trade, China needs a healthy consumer sector to sustain economic growth, the Morningstar report states.
Given the 15 percent share of the China in the world trade, the Morningstar report alarms on the situation that, “In the near term, China’s export boom is decelerating as consumer demand in major global economies is normalizing by shifting from goods back to services.”