Surging Chinese Consumption... Concerns Over Global Inflation Acceleration

Sharp Rebound in Tourism and Cultural Consumption
Electricity Consumption Expected to Rise with Real Estate Recovery
Excess Savings Reach 891 Trillion Won, Pockets Also Fat

[Asia Economy Beijing=Special Correspondent Kim Hyunjung] China's economic activity indicators are fluctuating, showing a sharp recovery in consumption. During the three years of the COVID-19 pandemic, consumption was suppressed, leading to a surge in savings, leaving people's pockets well filled. Some concerns have arisen that the sudden surge in consumption over a short period could accelerate global inflation.

According to local media including the Chinese state-run Global Times on the 25th, the number of visitors to famous tourist destinations in China during the recent Spring Festival period increased by up to more than 10 times compared to the previous year. In Wulingyuan, Zhangjiajie, Hunan Province, 40,018 tourists visited, an increase of over 900% compared to the previous year, and Tianmen Mountain in Zhangjiajie saw 34,853 visitors, up 478%. More than 400,000 tourists flocked to famous tourist spots such as the Great Tang All Day Mall in Xi'an on the 22nd alone, prompting authorities to recommend refraining from travel.

[Image source=Reuters Yonhap News]

Tourism and Movie Watching... Power Consumption Also Rises

Major cities like Shanghai also enjoyed a tourism boom, with 4.41 million visitors over three days starting from the 21st. Additionally, local travel agencies reported that hotel bookings in popular tourist cities in Yunnan Province such as Xishuangbanna, Kunming, Lijiang, and Dali surged by more than 400% compared to the previous year. The Chinese Ministry of Transport announced that 23.53 million Chinese travelers used railways, roads, waterways, and flights during the same period, a 67.7% increase from last year.

The cultural market, which was hit hard by the COVID-19 spread for several years, is also seeing an influx of people. According to Maoyan, a Chinese online ticket sales platform, the number of movie tickets sold (including reservations) in China has exceeded 5 billion within 24 days this year (as of 8 a.m. local time on the 24th). This set the fastest record for surpassing 5 billion tickets in annual box office history. Particularly, patriotic films such as "Man Zhanghong," directed by China's Zhang Yimou, are leading the surge.

Power consumption, a barometer of China's economic activity, is also estimated to reach 9.15 trillion kilowatt-hours (kWh) this year, a 6% increase compared to the previous year. The Global Times forecasted that power demand will continue to rise due to the recovery in food, accommodation, transportation, and tourism sectors. Especially, the gradual recovery of China's real estate industry is expected to boost power consumption for steel and building materials production, while production and investment in advanced manufacturing and service sectors will also accelerate.

The International Energy Agency (IEA) recently predicted that due to China's increased crude oil demand, global demand will reach 101 million barrels per day, far exceeding pre-COVID-19 levels. Soci?t? G?n?rale forecasted that if China's economic reopening momentum continues, Brent crude oil prices, currently around $82 per barrel (approximately 101,200 KRW), could rise to $100 by the end of the year.

[Image source=Reuters Yonhap News]

Excess Savings Amount to 891 Trillion KRW... Concerns Over Price Increases

Due to zero-COVID quarantine measures suppressing movement and consumption, Chinese people's savings have also surged. Thanks to their well-filled pockets, there is a high possibility of a short-term consumption surge known as "revenge consumption," according to both domestic and international forecasts.

According to a Bloomberg report on the 21st, economists at Nomura Securities analyzed Chinese bank account and income data and estimated that Chinese households' excess savings amount to $720 billion (approximately 891 trillion KRW). Excess savings refer to amounts saved beyond the average level. In a report released on the 19th, Nomura Securities economists Rob Subbaraman and Si Ying To analyzed that the slump in China's real estate market and the sharp rise in youth unemployment contributed to the increase in savings.

The report expressed concerns that the rapid recovery of economic activities following the sudden abandonment of the zero-COVID policy by Chinese quarantine authorities, combined with the central bank's monetary easing policy, could become a factor intensifying global inflation. Especially, if Chinese people actively resume overseas travel and consumption restarts regardless of region, prices in various countries could also be affected. Christine Lagarde, President of the European Central Bank, also mentioned at the Davos Forum on the 20th that while strong demand is welcome, the normalization of China's economic life will "put inflationary pressure on many of us."

[Image source=AP Yonhap News]

Soci?t? G?n?rale also stated in a recent report, "We cannot rule out the possibility that China's rebound in energy and other demands will be more proactive or stronger than we think," adding, "As a result, it could pressure the Federal Reserve (Fed) to raise interest rates higher than expected."

However, there is also an analysis that the impact of China's economic reopening may be limited due to simultaneous economic slowdowns in major countries such as the United States and the United Kingdom. Carolyn Bain, Chief Commodities Economist at Capital Economics, recently forecasted in a webinar with clients, "The US and UK will enter a demand slowdown in the coming months, and China's rebound will not fully offset this."

This content was produced with the assistance of AI translation services.