This Chinese province set a 9% GDP target — but then it locked down

According to booking site Trip.com, Sanya on the southern coast of Henan was the top destination for couples flying from China’s three biggest cities last week for China’s version of Valentine’s Day.

Lucas Schiffres | Getty Images News | Getty Images

BEIJING – China’s tourism-heavy Henan province is lagging behind lofty growth targets set in January.

Back then, the island said it 9% GDP growth target this year. But like China’s economy as a whole, growth has fallen far short of initial targets – largely because of the Covid-19 pandemic.

Henan’s seaside resort city of Sanya was forced to order thousands of tourists to stay in their hotels and local residents to stay at home due to a surge in Covid infections this month. The provincial capital Haikou also issued a stay-home order.

Airlines canceled flights, Except for tourists stranded on Hainan Island From Saturday. In the past few days, some people have been able to return to the mainland via government-organized charter flights.

But questions remain – about the uniform implementation of hotel stay subsidies, the cost of food and how soon most tourists will return to their homes.

“Hainan’s public image and reputation have suffered in the short term,” said Jack Penhirin, a partner in Oliver Wyman’s Greater China office. “When I talk to clients, they’re looking at all the bookings [the upcoming fall holiday] which are still very flexible. People haven’t canceled yet, but it doesn’t look good. Maybe less than last year.”

“It will be bad for luxury brands and hospitality at least until Chinese New Year next year,” he said, referring to the Lunar New Year holiday in late January 2023.

Economy of Hainan

In late July, China’s top leaders hinted that the country could make a mistake The GDP target is set at around 5.5% in March. Beijing has signaled no major stimulus or change to its “dynamic zero-covid” policy.

According to official figures, the national economy grew by only 2.5% in the first half of the year. Hainan’s economy underperformed even at that slow pace, growing by just 1.6% in the first half of 2022.

That’s a sharp slowdown from the island’s 11.2% GDP growth for 2021 as a whole.

In fact, Hainan’s growth last year was second only to that of Hubei province, noted Ying Zhang, a research analyst at the Economist Intelligence Unit.

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“Because of the international travel ban, Hainan has benefited from tourism income by about 60% last year,” she said. Zhang estimates that tourism accounts for more than 80% of Henan’s economy.

Sanya, on the southern coast of Henan, was the top destination for couples flying in from China’s three major cities last week for China’s version of Valentine’s Day. According to booking site Trip.com.

The island is one of the few beach destinations in mainland China for international luxury hotels such as Mandarin Oriental and Hyatt.

Hainan is also building a duty-free shopping mall as part of the central government’s efforts to transform the island into a free trade center and international shopping area.

Sales at the island’s duty-free stores surged 84% last year to 60.17 billion yuan ($8.93 billion), according to official figures.

During the consumer goods exhibition in Hainan in late July, sales at four duty-free stores 330 million yuan, up 27% year-on-year. Customs agency said.

Another blow to confidence

Thousands of tourists were stranded in the resort city of Sanya, Henan this week as the local Covid outbreak prompted airlines to cancel flights.

Str | AFP | Getty Images

“The question of course is when will consumers have confidence and peace of mind about travel and shopping that has been further delayed by this Hainan incident,” Penhirin said, adding that he expects this month’s lockdowns to be forgotten in a year or two.

“It’s more about confidence than income, especially for luxury goods,” he said.

In the meantime, he said brands should do more to track their inventory in China, to ensure products are not sold at levels that could lead to price wars.

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