• Hamsini Hariharan

Workers of the World, Spend!

This article first appeared in CNBC TV-18 on May 04, 2020 and can be accessed here.

You would think that a five-day holiday is not the answer to an economy that is recovering from the shock of a pandemic. But that is exactly what the Chinese government targeted by extending its typically three-day long May Day holiday by two extra days.

 Since 1920, when Labour Day was first celebrated in China, the holiday has become a part of the Chinese calendar. In 1999, when the Chinese government amended its public holiday system, it enforced week-long holidays for National day, Spring festival and May Day. This system propelled China’s domestic tourism industry as citizens finally had enough leisure time for long trips and even earned the moniker of “Golden Weeks” because of the profits that were generated. One study notes, “since being established on October 1, 1999, the holiday system has significantly boosted domestic demand, stimulated consumption, and promoted economic growth on a large scale.”

However, there are also significant disadvantages to the system caused by congestion and surge pricing. In 2008, the May Day holiday week was shortened to three days and compensated with other holidays such as Tomb Sweeping Day, Dragon Boat Festival and Mid-Autumn Festival.

This year, the government has extended the holiday by two days – primarily to encourage spending and travelling, even while striking a note of caution. Inter-province travel requires a “green” health QR code and  many provinces have even more travel restrictions in place. Most tourist attractions have been capped at 30% of their capacity, and even parks and public spaces require a reservation. Despite caution on behalf of citizens, tourist attractions in Beijing, for example, reached this capacity for the whole duration of the holiday within the first few hours. 

The government has distributed coupons in some spaces. An initial trend of “revenge spending” and “revenge travelling” was witnessed as closeted citizens are finally being allowed to resume their lives. It is not just the government but also businesses that are offering huge deals for consumers with some aeroplane companies offering flight tickets at 10% of the initial prices or even offering multiple seats for the price of one seat ticket (to ensure social distancing, of course).

While China takes the week to celebrate labour day, China’s labour issues are at the forefront of its policy. Unemployment ranked at 5.9% in March and it remains unsure how businesses will consider hiring as they have been hit hard in the first quarter of the year. When it opened up 30 years ago, China’s comparative advantage was its young, cheap and unusually large labour force. While it is not as young or cheap as it used to be, COVID-19 has also seen debates about whether companies will shift their manufacturing bases to countries in South and South-East Asia to reduce reliance on China. 

All of this continues to question what new normal look like in a post-pandemic world. At the same time that China opened up tourist attractions, and Beijing downgraded its emergency levels, the northern city of Harbin (which has a population comparable to Chennai) was put on lockdown after many new cases were reported. China is trying to balance pushing the economy back to full steam without triggering a second wave of infections. These are the same conundrums that India (or any other country in the world for that matter) will be forced to reckon with – hopefully, sooner than later.