Locals to dominate China's consumer spending

Luxury and cosmetics segments are tipped to benefit the most.

As governments discourage traveling outside of China, most of the consumption will largely come from local transactions, a Jefferies report revealed.

Short tours to nearby cities emerged as the new trend during the recent Golden Week, according to travel site Feizhu. Jefferies noted that this will benefit luxury and cosmetics in particular. Around 60% of Chinese luxury spending went outside mainland China.

Meanwhile, cosmetic brand L'Occitane said it has experienced a 44% rise in sales from April.

However, recovery will not be linear, as there could be shorter summer holidays for students. As fast food company YUMC commented, the shift in holidays might impact fast food or casual dining's Q3 sales.

“If outdoor activities like local travel are also affected (kids at school), it might also impact beverage sales. However, such a distortion should not alter the recovery trend. What will halt the recovery trend is unemployment rate, in our view, which the government is working on controlling,” Jefferies said.

China’s tourist receipts reached $6.77b (RMB48b) during this year’s five-day Golden Week holiday, a mere 42% of the 2019 figures. Domestic tourist receipts for the first 4 days of the holiday reached $6.06b (RMB43b), compared to last year's $16.64b (RMB118b) for 4 days.

Meanwhile, according to consumer data analytics firm Winnerinf, shopping malls' average traffic recovery rate was at 61.2% nationally from 1 to 3 May.