By Manya Saini and Niket Nishant
(Reuters) – Visa and Mastercard, which bet on China to boost travel spending, have had to contend with a disappointing first half of the year as post-COVID momentum in the world’s second-biggest economy loses steam.
In their earnings calls this week, both card giants said travel in China was nowhere near pre-pandemic levels.
“Looking at Mainland China specifically, cross-border travel continued to improve but remains well below 2019 levels,” said Vasant Prabhu, Visa’s chief financial officer.
His counterpart at Mastercard, Sachin Mehra, also said there was further room for travel recovery in China.
Inbound cross-border travel to China stood at nearly 50% of 2019 levels, while outbound travel was nearly 70%, the company said.
China’s economic recovery has been uneven since reopening its borders earlier this year after dismantling stringent COVID-19 control measures.
Data released earlier this month showed China’s gross domestic product grew just 0.8% in April-June from the previous quarter, on a seasonally adjusted basis, compared with a 2.2% expansion in the first quarter.
Youth unemployment rate in the country has also hit a record high.
Wall Street is flagging a slowdown in spending volumes as the U.S. Federal Reserve’s rate hikes prompt wide-ranging layoffs, worsening the economic climate.
“We do expect overall transaction growth to moderate as comparisons become more challenging and overall consumer spending moderates to a degree,” Edward Jones analyst Logan Purk told Reuters.
Visa and Mastercard are also up against difficult year-ago comparisons, when pandemic weary Americans had splurged on dining out and travel, giving little thought to red-hot inflation.
Since then, household budgets have dwindled as people grapple with higher prices of essentials such as groceries and electricity, and discretionary items.
(Reporting by Manya Saini and Niket Nishant in Bengaluru; Editing by Krishna Chandra Eluri)
