“Lipstick Effect” or Improving Consumer Confidence in China? Things Don’t Seem to Add Up in the Current Economic Environment

This year’s Labour Day holiday set multiple records. According to forecast by the China Central TV, 240 million people in China would travel during the five-day Labour Day holiday. It was even more difficult to book tickets during this holiday than during the Chinese New Year holiday. Data from Ctrip shows that its bookings sky-rocketed 100% from last year and doubled from 2019, the year before the pandemic broke out, and even roared 670% from the first day of this year’s Chinese New Year. People flooded the Hangzhou Railway Station during the Labour Day holiday travel rush. Each ring in Beijing saw severe traffic congestion. Beijing South Railway Station saw its biggest number of passengers since its establishment. For the first time ever, Shanghai’s Hongqiao Railway Station sold off all tickets bound for each corner of the country.

You might wonder why so many people are crazy about travel during this year’s Labour Day holiday at a time when the labour market is tough and the economy has just recovered from three year’s pain inflicted by the pandemic.

May people would rather pay much more for tickets and accommodation during the holiday period than buy houses and cars or get birth to a child.

In fact, there is a phenomenon called “lipstick effect” in economics, which is basically saying that the more sluggish the economy is, the more popular lipsticks are. This is because as a cheap and non-essential item, lipstick can serve to soothe people when they are in a tough situation.

Similarly, even if people cannot afford to buy homes, cars or other expensive things, they can manage to save enough money for travel.

This raises a question: do you think this year’s travel rush reflects improving consumer confidence or simply “lipstick effect”?