China economy

China’s COVID-19 outbreak hitting services sector, travel, hospitality

China’s COVID-19 outbreak hitting services sector, travel, hospitality

TESTING. People line up to get a nucleic acid test at a park, following new cases of COVID-19, in Beijing, China, August 6, 2021.

Tingshu Wang/Reuters

Citi analysts expect full recovery of China's services sector to be further delayed to the fourth quarter of 2021 as the Delta variant spreads

China’s tighter social restrictions to fight its latest COVID-19 outbreak, now in its fourth week and involving more than a dozen cities, are hitting the services sector especially travel and hospitality in the world’s second largest economy.

China has refrained from full lockdowns of major cities such as those seen during the early days of the COVID-19 outbreak in Hubei province, to avoid totally paralyzing the economy.

“The current wave has led to the reimposition of much tighter social distancing measures, which would significantly hurt the transport, tourism, and other service sectors,” Citi analysts wrote in a note on Wednesday, August 11.

“We now expect full recovery of the service sector to be further delayed to the fourth quarter.”

Ding, who operates a 15-room lodge in the western highlands of Sichuan province, said she had expected an occupancy rate of at least 80% on weekdays between late July and early August.

But with eight local infections detected in Sichuan, the actual occupancy rate has been 20% to 30%, she told Reuters.

When the summer travel season kicked off in July, she received 300,000 yuan of bookings that month.

“Now, in August, 100,000 yuan would be a struggle,” Ding said.

China reported 83 new locally transmitted cases for Tuesday, August 10, the health authority reported on Wednesday, bringing the cumulative number of new infections in the past week to 583.

That was an increase of 85.1% in the total number of local cases from a week earlier. The rate is almost unchanged from the 87.5% surge seen the previous week, which officials say has been mainly driven by the highly transmissible Delta variant.

The Delta variant has been detected in more than a dozen cities since the first cases were found in Nanjing in late July, spurring officials in Beijing to tell local governments to overcome “a laxity of mind” in their containment measures and close loopholes in their virus-fighting efforts.

Domestic flights are still allowed to depart from cities that have reported cases, expect for those leaving Nanjing, Yangzhou, and Zhangjiajie. But flights and trains entering Beijing from areas where cases had been reported have been cut.

China’s overall scheduled air capacity fell 31.9% over the last week, one of its steepest weekly drops during the pandemic, according to aviation data firm OAG.

Coinciding with the Nanjing outbreak, and the imposition of mass testing and travel restrictions, domestic flight bookings have sharply declined, said Juan Gomez at Valencia, Spain-based aviation consultancy ForwardKeys.

China has reported a total of 94,080 infections since the novel coronavirus emerged in its central city of Wuhan in late 2019. –