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China faces Covid blues as Lunar New Year sales fall

China's consumption yet to pick up

China’s just concluded week-long Lunar New Year season has failed to bring cheer amid concerns over a prolonged economic slowdown. Stringent Covid 19 induced restrictions created confusion among people forcing them to opt for short distance trips. Just ahead of the festive week, several local authorities imposed travel restrictions which included mandatory quarantines. This has not only impacted consumption around this otherwise busy time of the year but has also had an impact on the country’s tourism sector.

“Consumption over the week-long Lunar New Year holiday in China failed to get anywhere near pre-pandemic levels, and some analysts warn that the downtrend could signal a worsening economy,” the South China Morning Post said in a report. Both spends during this period and the number of trips taken by the Chinese remained significantly lower not only when compared to the 2019 levels but also 2021.

Tourism and related industries accounted for more than 11 per cent of the country’s gross domestic product in 2019.

Also read: China's focus on food security will increase in the new year

Not just that. It created over 79.80 million jobs – both direct and direct, accounting for 10.31 per cent of the total employment in the country.

According to data collation portal Statista, around six billion domestic trips were undertaken in 2019. Beijing, Shanghai, and Guangzhou were among the most popular domestic destinations among Chinese tourists. The number of foreign tourists visiting China ranged at around 32 million in the same year.

“Tourism sector, the world over, has been one of the worst impacted by the Covid 19 pandemic but for China this is even more critical since the country is already battling a host of other economic challenges including a collapse in the real estate sector,” an analyst told India Narrative.

China’s 14th Five Year Plan period covering the years between 2021 and 2025, emphasises on further developing the tourism sector. Beijing will take proactive measures to encourage and boost “high-quality inbound tourism, train multilingual tour guides, and enrich and enhance the image of China's tourism,” Global Times said. The 14th Five Year Plan was officially adopted on 11 March 2021.

“Under the guideline, the country will promote inbound tourism at an appropriate time, and formulate technical guidelines on epidemic prevention and control for inbound tourism in a scientific way,” it added.

However, worries for people whose livelihood depends on the sector, are increasing.

The International Monetary Fund (IMF) also warned China that the stringent restrictions at this stage could be damaging for its economy.

Also read: China's economic challenges rise but will that lead to the beginning of a collapse?

“China is still using a zero-Covid policy. But what Covid is teaching all of us is that a highly transmissible variant may be much more difficult to contain without a dramatic impact on the economy,” IMF chief Kristalina Georgieva said at the World Economic Forum. She added that Beijing should reassess its policy especially since the Omicron variant is less severe than the previous ones.