China’s tourism surge may net $42 billion for economy in 2025

China could earn $42 billion this year from a shift in travel habits toward domestic tourism and a surge of foreign visitors, analysis by Bloomberg Intelligence showed, in what it called a windfall for an economy struggling to fire up consumption.

While a boost from the government’s subsidies for consumer goods is fizzling out, households are proving far more willing to shell out on services like tourism, especially as they pull back from travel abroad.

As a result, Bloomberg Intelligence sees $27 billion redirected toward the domestic market from overseas, with an additional $15 billion generated from tourists drawn to China by its visa-free programs with dozens of countries.

“While direct stimulus for durable goods reveals its constraints, the tourism sector emerges as a promising catalyst to invigorate consumption,” analysts including Catherine Lim, Chang Shu, and Eric Zhu said in a report Thursday. “Structural shifts in consumer behavior offer a more reliable tailwind.”

After growth in double digits in most years before the pandemic, retail sales are on track to disappoint by expanding 4.1 percent in 2025. Relative to the market consensus in August for an annual increase of 4.6 percent, that’s equivalent to an undershoot of about 254 billion yuan ($36 billion).

“The shortfall reflects the inherent limitations of subsidy-driven consumption, which encourages consumers to front-load purchases and leads to ‘subsidy fatigue’ rather than sustainable demand,” they wrote. “The current environment is further complicated by trade and geopolitical pressures coupled with a crawling property recovery.”

Among companies that stand to benefit are local champions such as Trip.com and Xiaomi Corp., as clients prefer affordable premium products, they said. Brands such as Anta and Midea are also set to be on the receiving end of travel spending that Bloomberg Intelligence calls “a significant opportunity” for China.

Pressure is building on the Chinese government to shore up consumption as US tariffs threaten the export engine of the world’s second-largest economy. It’s also facing deflation and a slowdown in investment caused largely by borrowing limits on local governments and the housing slump.

Meanwhile the impact from the cash-for-clunkers program is already waning, with retail sales growth slowing to the weakest this year in July. The authorities should steer demand toward unsubsidized goods and services, according to the report.

“With policymakers more familiar with a conventional investment-heavy stimulus model, it will take time for them to establish a well-run consumption-focused framework,” the analysts wrote in the report.

Chinese authorities have already been looking at services to unlock more sustainable spending by consumers. The government on Monday rolled out a one-year program to provide discounted personal consumption loans for purchases of goods as well as services such as elderly care, education, and tourism.

Similar lending incentives are also available for services providers in eight sectors ranging from catering and accommodation to entertainment, tourism, and sports.

The measures followed government announcements a few weeks earlier to waive tuition for children in the final preschool year, and to start handing out childcare subsidies across the nation.

The Bloomberg analysts estimate China’s consumption stimulus — as well as measures to boost pension payouts, public health-care spending and subsidies for disabled elderly people — will total no more than 600 billion yuan in annual fiscal expenditure. The amount equals only 0.4 percent of China’s gross domestic product.

“The modest initial steps spanning multiple areas also suggest a learning curve: experimentation, possibly including some back-and-forth, will be necessary to get the right policy mix for effectively boosting domestic demand,” the analysts said.