News Analysis: Golden Week spending behavior underlines new economic pattern

The "spendathon" over the Golden Week holiday offers a glimpse into how China's shifting consumption pattern is reshaping the economic landscape.

In the week-long National Day holiday, Oct. 1-7, retail and catering firms across China rang up sales of 1.08 trillion yuan (170 billion U.S. dollars), a healthy 11 percent increase from a year ago, according to data released by the Ministry of Commerce (MOC) on Thursday.

This year was the first time that sales have exceeded 1 trillion yuan since Golden Week was named a national holiday in 1999.

The holiday, and spending patterns, illustrates the rising power of consumption and the role it plays in driving economic growth in China, not to mention the increasing purchasing power of the Chinese.

As consumers' demands evolve, services, instead of material products, are starting to dominate the consumption structure, according to a report published by an MOC research institute.

Tourism continued to prosper during the holiday week. Some 8.96 million passengers traveled on domestic and international flights, while 98.8 million trips were made by train over the 10-day period before and during the holiday, both up from a year ago, according to official statistics.

Neighbouring countries like Japan, the Republic of Korea and Thailand, as well as Europe and the United States, were the most popular destinations, according to online travel agency Ctrip.

The entertainment business also thrived. On the first day of the holiday week, cinema box office returns surged 53.66 percent year on year to 315 million yuan, a record high growth.

"We can see that this trend -- consumption of services -- will continue to make an increasing contribution to GDP," said Zhao Ping, an economist with the MOC research institute.

The service sector already accounts for half of the national GDP, while consumption accounts for 60 percent of China's economic growth.

In rural areas, which feature less-developed shopping facilities, customers are actively shopping online, but even so, there is still plenty of room for more growth.

Xu Zheng, rural shopping manager for several northwestern provinces at taobao.com, said over the week-long holiday his team received more than 10,000 orders from over 120 villages for products ranging from soap to electric bikes.

Rural online spending in China is expected to hit 460 billion yuan in 2016 from 180 billion yuan in 2014, according to AliResearch, the research arm of e-commerce giant the Alibaba Group.

Almost 20 percent of the rural population shop online. While behind the national average of 42 percent, rural-online spending posted 64 percent growth in the second quarter of 2015, markedly higher than the national average of 53 percent, according to a consumer confidence survey by the Nielsen Company.

This willingness to spend among rural consumers is bolstering overall confidence, as the consumer confidence index in first-tier cities dropped one point from the first quarter, while the indices for smaller cities are holding steady, the Nielsen survey shows.

Rural-retail sales of consumer goods has been expanding faster than urban sales for the past three-consecutive years.

Rural consumption plays a key part in shoring up China's overall consumption growth, which has become a major driver of the economy, Zhao observed.

The Internet is altering other behavior, too. With the proliferation of smart devices, many Chinese are accessing the booming online-to-offline (O2O) market, ordering a range of services from food to taxis and coupons.

Statistics from retailer Suning Commerce Group showed that its Golden Week 020 sales as of 6 p.m. Wednesday had soared by more than 120 percent year on year.

The country's O2O market generated 304.9 billion yuan in the first half of 2015, jumping 80 percent from a year earlier, MOC figures show.

The O2O market will transform offline firms' business models, and support startups, both of which are key to maintaining steady consumption growth in a time of economic slowdown, said Zheng Min, chief executive officer of e-commerce news portal Ebrun.

China's economic growth has plateaued as a result of weak external demand, cooling property investment and a domestic industrial glut. GDP expanded by 7 percent year on year in the first half, the slowest pace in nearly a quarter of a century. Endi