China’s consumption has a new, fast-growing driver: local tourists

In the first half of this year, leisure travel within China exploded. As the summer travel season builds towards the Mid-Autumn Festival and the “golden week” that follows National Day on October 1, domestic travel has emerged as one of China’s most important, if underappreciated, drivers of consumption and growth. During the extended Chinese New Year holiday, travel and consumer spending boomed. Domestic trips jumped to 596 million and spending surpassed 803 billion yuan (US$118.13 billion), each rising by nearly 20 per cent from the holiday period a year ago, which was one day shorter. Momentum continued with the May Day holiday, when domestic travellers made 325 million trips and spent 185.5 billion yuan. The surge in travel and spending is no accident: the government added two more days of public holiday starting from 2025, specifically to boost leisure spending. Local authorities around the country have added school breaks for the same reason. The move is working. Domestic travel has recovered faster than cross-border travel since the Covid-19 pandemic. During the Dragon Boat Festival holiday last month, domestic trips reached 124 million, up 4.4 per cent year on year, well above the 96 million trips in 2019. Inbound tourism, by comparison, only approached pre-pandemic levels in 2024, when arrivals recovered to 97.2 per cent of the 2019 count and spending to 93.5 per cent. For investors tracking China’s consumer confidence, the domestic traveller is the one to watch. And these travellers ride on existing infrastructure. Over two decades, China has built the world’s largest high-speed rail network, along with new airports, expressways and hotels. This capacity, criticised as overbuilt, is now being filled by domestic demand. Every weekend trip booked generates revenue at little to no new capital cost. That is why tourism is fast becoming important to China’s medium-term growth outlook. Tourism represented only about 4 per cent of China’s gross domestic product in 2024. This compares to about 10 per cent for the European Union, where most of the activity is within Europe. Morgan Stanley has called travel a new growth engine for China, estimating that tourism’s share of GDP could reach about 6.7 per cent by 2030 with domestic tourism driving most of the expansion. A long list of industries stands to benefit. The most direct are railways, airlines, hotels, homestays and catering. Attractions come next: China’s growing roster of theme parks is converting holiday time into consumer spending, while an expanding national park network draws value-oriented families and supports outdoor equipment sales. Perhaps the most interesting development is the rise of experience-based tourism. Travellers are increasingly paying for activities rather than destinations. Tours of electric vehicle and drone factories, and the massive solar farm in Dunhuang in northwestern Gansu province, as well as hands-on robotics experiences in Shenzhen, are becoming attractions in their own right. This reflects a broader consumer shift towards experiential spending, a trend seen across many developed economies. Domestic travel also redistributes wealth. When residents of the prosperous eastern seaboard travel to dramatic inland destinations, their spending flows to provinces that benefited less from previous rounds of industrialisation. Communities in the interior, including many of China’s 56 recognised ethnic minorities, gain a direct stake in the consumer economy through hospitality, food and cultural tourism. Moreover, there’s reason to prioritise expanding the domestic market over increasing international arrivals. While international tourists do tend to spend more per visit, arrival numbers can be volatile and affected by geopolitics. Too many international tourists can also become a local political issue, as we have seen in Japan and Europe. Beyond the economic benefits, domestic tourism brings intangible social benefits too; in a country as vast and diverse as China, internal cultural exchanges bring communities together and deepen the shared national identity. Hong Kong offers a contrasting illustration of the trend’s strength. Residents now cross the border in large numbers on most weekends – over the recent Easter break, about 80 per cent of outbound trips were to the mainland. Local retailers and restaurants feel the drain. I expect the pressure to ease as price gaps between Hong Kong and neighbouring mainland cities narrow. In the meantime, the outflow confirms how efficient, fast and attractive mainland travel has become. So what should we be watching in the second half of the year? Trip counts alone say little. A healthy travel-led consumer economy shows spending growing at least as fast as trips, with people trading up, staying longer and paying for experiences, rather than more crowds spending less per head. It shows demand persisting outside holiday windows. And it shows growth spreading beyond top-tier cities into smaller and county-level destinations. While the traditional summer holiday season will reveal some indicators of the health of the domestic tourism economy, the next major tests will be Mid-Autumn Festival and “golden week”. If spending per traveller continues to rise, occupancy remains robust and demand spreads beyond major urban centres, domestic tourism will have confirmed itself as something more substantial than a post-pandemic rebound. While robust holiday travel spending generally indicates healthy consumers and a maturing economy, China’s burgeoning domestic tourism industry is about more than just taking holidays. It’s about creating new channels for consumption growth and developing a service-sector growth engine. In a market long awaiting evidence of a more durable consumer recovery, domestic tourism may prove to be one of the most compelling trends to watch.

China’s consumption has a new, fast-growing driver: local tourists

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}After a blockbuster first half, all eyes will be on how domestic tourism sustains the momentum through the autumn and ‘golden week’ breaks

After a blockbuster first half, all eyes will be on how domestic tourism sustains the momentum through the autumn and ‘golden week’ breaks