China schools introduce new holidays to boost spending by parents

By freeing up time away from classes, authorities are pulling on a new lever in their quest to get households to spend more

Until this year, only a handful of cities in China allowed schools to go on a break each fall. But in recent months, at least 27 others have joined the list, with more possibly on the way.

The number of travelers from Foshan surged more than 50% during the autumn break from a year ago(Pixaby/Representational Image)

From the eastern Zhejiang province to Sichuan in the southwest, officials are carving out days off in the hope that families use the chance to splurge on travel — or at least dispatch their children on school-organized trips.

By freeing up time away from classes, authorities are pulling on a new lever in their quest to get households to spend more, and at little cost to cash-strapped local budgets. And if the southern Chinese city of Foshan is any indication, China may not have to wait long for the payoff.

After Foshan introduced a three-day school vacation in November, calls to Guangzhou Comfort International Travel Co. came pouring in from families suddenly searching for an activity to occupy the time. Business was so brisk that the staff had to work overtime and breaks were slashed in half, stretching the Foshan branch’s resources to the point where it had to ask the travel agency’s Guangzhou headquarters for extra hands.

“We were indeed a bit flustered when we had to handle the policy of autumn breaks for the first time,” said Zheng Zihua, who works at the agency. “Our business was even hotter than the November before the pandemic.”

The number of travelers from Foshan surged more than 50% during the autumn break from a year ago, its data showed, of which more than three-quarters were families.

The latest change followed Beijing’s repeated calls on localities to adopt spring and autumn school holidays to “improve the environment for consumption.” Under China’s current education system, students in primary, middle and high schools only get two vacations a year, in summer and winter.

Should Foshan’s policy spread nationwide, it could add almost $50 billion to annual consumption — equivalent to 0.7% of last year’s total retail sales — according to calculations by Bloomberg, based on the spending patterns seen during past holidays of similar length.

Not all parents are on board, however, since adults in China get only a few days off a year and many worry about exhausting all of their paid leave options.

Still, the effort has shown early dividends. According to the latest data from Trip.com provided to Bloomberg, hotel bookings from Zhejiang increased 68% than a year ago during the autumn break, while flight reservations rose 22%. Over in Sichuan, hotel bookings gained 92% from a year ago.

Letting students go on recess also has the added advantage of sparing cost for local governments that often have to foot the bill for initiatives coming from Beijing.

“This is what local governments can do to promote consumption — without having to directly provide funding for it,” said Larry Hu, head of China economics at Macquarie Group Ltd. Still, “demand-side stimulus will be key to expanding consumption, such as increasing social security payments, offering tax breaks and stabilizing the property market.”

After China made boosting household spending a higher priority this year, the focus of recent efforts by officials is more on promoting the consumption of services such as tourism and entertainment — targeting a part of the economy that holds out the promise of unlocking additional demand.

Retail sales of services have already increased 5.3% in the first 10 months of the year, becoming a bright spot of a consumer market beset by deflation and subdued confidence. By contrast, growth in goods sales has slowed for five straight months — slipping to 2.8% in October — among the longest such streaks in years.

The untapped potential is there because services-related expenditure in China accounts for just 21% of gross domestic product, according to estimates by Australia & New Zealand Banking Group, compared with more than 40% in the US.

The ruling Communist Party will probably make the services sector “a key policy focus” of its next five-year plan, Zhang Jingjing, chief macro analyst at China Merchants Securities, wrote in a note last week. “The primary issue with services consumption lies in the inadequate supply of consumption options, an area where the government can take action,” Zhang said.

That’s where China is still lagging. So far this year, authorities have ramped up subsidies for consumer products, rolled out national childcare subsidies, and expanded visa-free access to more countries in an effort to woo more foreign tourists.

Critics question if officials are continuing a piecemeal approach by tweaking school schedules and leaving families to fend for themselves.

Xavier Lei, a high school teacher in Sichuan’s Chengdu, assigned no homework to his class during a mid-November holiday but still worried the students only had limited entertainment options.

“Parents don’t have days off so they can’t travel out themselves,” said Lei.

No wonder some parents are complaining about the arrangement with only a handful of holidays at their disposal. In China, people employed for up to 10 years typically only get five days of paid annual leave — half of what’s set aside for Americans with similar work experience.

Joanna Xiao said her daughter, a primary school student in Chengdu, could only stay home and read books during the three-day autumn break.

“For a family with both working parents, it’s impossible to get some time out to accompany the kids,” said Xiao, who works in the IT industry. “The policy was announced very suddenly,” she said, making it difficult for the family to change plans.

Another option for parents with no leave to spare is to send their kids on so-called study tours, excursions organized by schools or travel agencies. It could be an expensive choice for families who are asked to fork out thousands of yuan for tours usually lasting just a few days.

In Foshan, parents have made their feedback public, prompting the education bureau to clarify that schools will provide free childcare services for those who can’t travel with kids. It also launched an online questionnaire last week, surveying parents on the timing and duration of the spring and autumn breaks, as well as their opinion of the policy.

The impact on consumption from changes under way in schools could be “modest, once the possible negative effect on other holiday spending is taken into account,” said Louis Kuijs, chief Asia-Pacific economist at S&P Global Ratings.

Still, as an experiment in powering a consumer society, it’s emblematic of a search for new solutions.

“Together with other objectives such as reducing academic pressure and introducing out-of-class experience, it definitely is quite different in terms of the mindset and implications than the push to boost industrial upgrading and innovation,” Kuijs said.