China’s Golden Week Momentum Meets US Tariff Tensions Before APEC Summit

China’s Golden Week Holiday: Will Record Travel Numbers Reboot the Economy?

China’s eight-day Golden Week holiday ends on Wednesday, October 8, and early indications suggest a robust start to the fourth quarter, offering potential relief to markets wary of slowing global demand.

Travel Data Points to a Strong Consumption Rebound

Railway travel reportedly broke the one-day record on October 1, carrying over 23 million passengers. Travel numbers suggested a sharp rebound in private consumption, raising hopes that Beijing would achieve its 5% GDP growth target.

Notably, positive sentiment toward early data from the Golden Week holiday comes despite the ongoing effect of US tariffs on the broader Chinese economy.

Unemployment and consumer spending have been pressure points as external demand has continued to weaken, prompting firms to cut prices to stimulate demand. The resulting squeeze on margins led firms to reduce staffing levels to counter pricing trends.

Rising Unemployment Threatens Momentum

However, economic uncertainty may resurface after the October data if external demand trends continue to affect the labor market. China’s unemployment rate increased from 5.2% in July to 5.3% in August. Crucially, youth unemployment reached 18.9%, up from 17.8% in July and 14.5% in June.

Rebooting external demand would likely be crucial in easing price pressures and boosting job creation, given that elevated unemployment is unlikely to foster a sustainable jump in consumer spending.

With domestic consumption still fragile, policymakers will look to foreign demand—and trade diplomacy—for support.

APEC Summit Looms: Trade Talks Back in Focus

As the APEC Summit, held from October 31 to November 1, looms, all eyes will be on President Trump and President Xi. A trade deal, including lower tariffs on Chinese goods, could change the narrative for China’s industrial sector and the broader economy.

However, a trade deal is not assured, given that China has taken evasive steps to pressure the US administration into dropping levies. Beijing has targeted US farmers, one of Trump’s key voting pools, drawing criticism from the US President.

Shaun Rein, founder of The China Market Research Group (CMR), recently commented on China’s ongoing retaliatory measures to US tariffs, stating:

“China is no longer buying American beef, they are buying Australian beef. China is no longer buying American soybeans, they are buying Argentinian soybeans.”

He also commented on Beijing halting US chip purchases, noting that China is manufacturing its own, reducing reliance on US chips.

Trump’s Response and Geopolitical Undercurrents

President Trump responded to China’s soybean strategy, stating:

“The Soybean farmers of our Country are being hurt because China is, for ‘negotiating’ reasons only, not buying. We’ve made so much money on Tariffs, that we are going to take a small portion of that money, and help our farmers. I will never let our farmers down.”

However, the US President did not retaliate against China for cutting soybean imports, contrasting with the 50% US tariff on India for buying Russian oil. Notably, China remains the leading importer of Russian oil. This selective restraint may indicate ongoing backchannel negotiations.

President Trump’s silence on retaliatory measures against China suggests a potential deal, potentially at the APEC Summit. While China’s Golden Week holiday may reboot the economy, several US economic indicators are flashing early stagflation warnings.

Market Implications: Uncertainty Ahead of APEC

President Xi may have the upper hand going into the APEC Summit, but President Trump’s unpredictability will leave traders on edge. A full-blown US-China trade war could damage more than the world’s two largest economies and potentially derail investor sentiment.

Upcoming economic indicators could set the tone for talks between President Trump and President Xi at the end of the month.

US labor market data could fuel fears over stagflation, challenging expectations of aggressive Fed rate cuts to bolster the economy. Chinese retail sales and unemployment data will reflect the effectiveness of Beijing’s stimulus efforts in countering US tariffs.

President Xi’s reported plans to invest significantly in the US could be a checkmate in US-China relations. A substantial investment would create much-needed US jobs and support the economy at a pivotal time for the US administration. The question remains: what price is President Trump willing to pay?

China Beige Book recently reported:

“China is pushing the Trump administration to roll back national-security restrictions on Chinese deals in the US.”

Mainland Equity Markets: Post-Holiday Blues or New 2025 Highs?

Mainland equity markets will reopen on Thursday, October 9. During the Golden Week holiday, US equity markets reached new all-time highs, while gold hit a record high of $3,977.

Optimism toward a US-China trade deal and domestic consumption during the Golden Week holiday could lift Chinese stocks when trading resumes.

The CSI 300 gained 3.2% in September, extending the winning streak to five months. Meanwhile, the Shanghai Composite Index rose 0.64%, reaching a 10-year high.

However, Mainland equity markets remain below record highs, offering the potential for strong fourth-quarter gains. Downside risks persist despite the market euphoria. Rising US-China trade relations could trigger a Mainland equity market sell-off in the absence of policy support from Beijing.

What’s Next: Data, Trade Headlines, and Stimulus Watch

As China’s Golden Week comes to an end, upcoming economic data will influence sentiment. Weak numbers and Beijing’s silence on fresh stimulus could weigh on Mainland-listed stocks. Ultimately, trade developments will likely determine whether optimism translates into sustained market gains.

Progress toward a trade agreement could limit the effect of any weak Chinese data, sending Mainland-listed stocks higher.

Discover strategies to navigate this week’s market trends here.