Tariffs Aftermath: China Sees Slight Surge In Holiday Spending, Services Sector Loses Momentum
Despite the uptick, overall spending remained below pre-COVID levels, highlighting lingering weakness in the broader economic recovery.
Chinese consumers spent 180.27 billion yuan ($24.92 billion) during this year’s May Day holiday, marking an 8 per cent increase compared to the same period in 2024.
Despite the uptick, overall spending remained below pre-COVID levels, highlighting lingering weakness in the broader economic recovery, reported Reuters.
The five-day break, one of the most important on China’s holiday calendar, is often viewed as a key signal of household sentiment and discretionary spending strength in the world’s second-largest economy.
According to China’s Ministry of Culture and Tourism, domestic travel saw a 6.5 per cent rise, with 314 million trips recorded. Usage of Weixin Pay, one of the country’s most widely used digital payment platforms, also climbed by over 10 per cent year-on-year, particularly in restaurant-related transactions. Still, a closer look at individual spending reveals muted enthusiasm: per capita outlay edged up by just 1.5 per cent to 574.1 yuan—still short of the 603.4 yuan average seen in 2019.
Meanwhile, cinema revenues declined significantly. The box office brought in 747 million yuan during the holiday, representing roughly half the takings of the same period last year.
Also Read : Ford Says Tariffs To Have A $1.5 Billion Impact, Halts Full Year Outlook
Trade Tensions Weigh on Services Sector
In contrast to the consumer activity during the holiday, April saw China's services sector lose momentum. The Caixin/S&P Global services purchasing managers' index (PMI) fell to 50.7 from 51.9 in March—its weakest showing since September. The 50-point threshold separates expansion from contraction. This matched the official PMI figures, which also indicated a slowdown, falling to 50.1 from 50.3.
"While some caution is clearly warranted, we suspect that firms are overestimating how much damage U.S. tariffs will do," said Zichun Huang, China economist at Capital Economics.
The survey also reported that new orders grew at their slowest pace since December 2022. Although export orders saw a modest increase, thanks in part to recovering tourism—overall demand remained tepid. Business sentiment in the services industry hit its lowest level since February 2020. Many firms flagged US tariffs as a key concern, contributing to weaker hiring and cost-cutting strategies.
For the second consecutive month, service providers reduced headcounts to manage expenses. This led to a buildup of unfinished work, with the corresponding sub-index moving into expansionary territory for the first time this year. In 2023, services accounted for 56.7 per cent of China’s GDP and employed nearly 48 per cent of the workforce. However, the combination of trade pressures and economic uncertainty continues to weigh heavily on the sector’s outlook.
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