China's economy kicks off new year with fresh trends

As the Year of the Snake unfolds, China's economy is setting the stage for dynamic growth, with consumption, high-quality development and the capital market presenting new growth drivers, signaling a strong recovery and a shift toward more sustainable and innovation-driven development.

Booming consumption

China saw vibrant consumer spending during the recent Spring Festival holiday, with standout sectors including tourism and services.

Domestic travel spending during the eight-day holiday, which ended last Tuesday, reached 677 billion yuan (94.4 billion U.S. dollars), representing a 7 percent increase from the same period last year, according to data released by the Ministry of Culture and Tourism.

Homestay businesses flourished during the period, attracting tourists with personalized lodging experiences marked by local cultural characteristics. Their sales revenues increased 12.6 percent compared to the Spring Festival holiday last year.

This year's holiday also saw a surge in enthusiasm for winter sports and leisure, with attractions such as the Harbin Ice-Snow World attracting over 610,000 visitors.

The 2024-2025 winter season is expected to see some 520 million trips, generating over 630 billion yuan in tourism revenue, according to a report released by the China Tourism Academy.

China's Spring Festival holiday box office revenue climbed to a record-breaking 9.51 billion yuan, according to the China Film Administration. The number of holiday moviegoers also soared, with 187 million people packing out theaters.

Strong participation in China's policy-backed consumer goods trade-in program boosted holiday market consumer sentiment. Household appliance and audiovisual equipment sales revenues surged 166.4 percent from last year's holiday figure, and sales of communication devices jumped 181.9 percent, according to the State Taxation Administration.

Since last year, "trade-in" has become a common term in China's consumer market, with the national trade-in campaign driving steady retail sales growth.

High-quality development

Immediately after the holiday, many regions across China held their first official meetings of the new year, focusing on such areas as strengthening the real economy, optimizing the business environment, and advancing technological innovation to drive high-quality economic and social development.

Guangdong, a major manufacturing province, has released a 2025 action plan to build a modern industrial system with an annual investment of 1 trillion yuan, including 380 industrial projects in high-end equipment manufacturing, new materials, petrochemicals, steel, and other sectors.

Shanghai held its annual city business environment conference for the eighth consecutive year and also released an action plan, introducing 58 measures, including measures to optimize overall services for enterprises and improve business-related supervision and inspections.

In Zhejiang, the provincial government is working to foster the deeper integration of technological and industrial innovation, and to establish a collaborative framework that brings together universities, platforms, enterprises and industrial chains.

Likewise, central China's Hubei Province and the southern island province of Hainan are focusing on technological innovation as their key development direction.

Upbeat market outlet

Global financial institutions are optimistic about China's capital markets after the holiday, reinforcing the country's often underestimated capacity to sustain innovation.

As investors become more aware of this innovation, the valuation gap between China and emerging markets will narrow, and foreign capital inflows will pick up, said Desmond Kuang, chief investment officer for China at HSBC Global Private Banking and Wealth.

James Wang, head of China Strategy at UBS Investment Bank Research, said that thematic trading could be a key feature of this year's equity market.

Thematic trading could be driven by the uncertain yet potentially pervasive nature of AI applications -- which could lead to revenue growth for beneficiaries -- and by a moderately loose monetary policy that supports equity valuations, Wang said in a research note.