China’s Economy: What the Tourist Boom Tells Us

Record numbers set out for this month's national holiday. Could the crowds signal that better times are coming?

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This picture taken on Oct. 3, 2012 shows visitors gathered on the Great Wall of China outside Beijing

Chinese travelers looking for a relaxing Golden Week may have been disappointed. Record numbers set out for this month’s national holiday, creating a human traffic jam of epic proportions. Over the course of the eight-day break, some 740 million people were on the move. At Beijing’s Forbidden City on Oct. 2, visitor numbers hit a record high of 180, 000 tourists — the equivalent of 357 people entering the complex every minute. The following day, Hangzhou’s picturesque West Lake welcomed 900,000 visitors into an area less than twice the size of New York’s Central Park. Things got so uncomfortably packed that several sacred mountains, including Tai Shan, Wu Dang Shan and Lu Shan, were even forced to stop selling tickets altogether.

Throughout the week, Chinese social-media sites were abuzz with reports from disgruntled tourists complaining about lengthy queues, chronic overcrowding and awful traffic. One popular post on Weibo, China’s top social network, featured pictures of tourists stuck in highway traffic jams getting out of their cars to play tennis or host picnics on the road. Another showed pictures of beaches in the island province of Hainan covered in a thick blanket of tourist-created trash. A third told of a camel that dropped dead of exhaustion after ferrying tourists through the Gobi Desert in the northwestern town of Dunhuang.

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While travelers groaned, though, economists must have been grinning. For months, China watchers have been worrying about the prospect of a hard landing for the Chinese economy. China’s planners have been working to shift the country’s economy away from reliance on government-funded infrastructure spending and low-value manufacturing toward a more consumer-driven model of growth. Thus far, their efforts have had limited success, with consumers largely choosing to hold on to their cash rather than fritter it away on discretionary spending. Meanwhile, demand for Chinese-made products from Europe and the U.S. continues to lag, and China analysts are not convinced that domestic consumers are ready to replace the flagging low-end manufacturing sector. Could the crowds signal that better times are coming?

Some are cautiously optimistic. Travelers pumped close to $35 billion into the domestic economy during the seven-day Golden Week period at the start of October, an increase of 45% compared with the same period last year. “People who believe China is mired in a crisis, with slumping growth and falling stock prices, could be shocked by this strong tourism data,” Lu Ting, an analyst at Bank of America Merrill Lynch, wrote in a recent report. The promising tourism data, he says, indicates that consumption spending is increasingly shifting toward leisure pursuits.

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Others worry that the average consumer is not yet ready to fuel the next round of growth. “China is still at an investment-led stage of growth,” argues Yin Xingmin, the deputy director of the China Center for Economic Studies at Shanghai’s Fudan University. “The country has a per capita GDP of $5,000. Based on the experience in other countries, until GDP reaches $15,000 China can only rely on investment-led growth.”

After a gridlocked Golden Week, many questioned whether the country’s infrastructure is ready to shoulder the happy burden of leisure spending. Gu Bo, a Beijing-based marketing executive, planned a family trip to the famous communist stronghold of Lu Shan. But after seeing stories of the crowds thronging to the region, she decided to change her plans. “I saw on TV there were loads of people there,” she says. “I don’t want to be trampled to death, so I returned the train tickets and canceled the trip.”

— With reporting by Yongqiang Gu / Beijing

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