Xi Jinping Wants His Officials To Cut Down On Unnecessary Travel, Booze, Cigarettes Amid Sluggish Chinese Economic Growth

China has ordered officials across the country to cut back on wasteful spending on travel, food, alcohol, and cigarettes, a reiteration of President Xi Jinping's austerity drive amid broader economic headwinds.

The message, issued by the central government and the Communist Party, calls for "strict diligence and thrift, and opposes extravagance and waste," was reported by the state media outlet Xinhua on Sunday.

The announcement comes as slowing economic growth and falling land sales hurt government revenues, putting pressure on local budgets.

U.S. alcohol brands such as Constellation Brands (STZ) and AB InBev (BUD) have a small but growing presence in China, while Marlboro seller Philip Morris International (PM) operates a joint venture with state-owned China National Tobacco Corporation (CNTC).  

All major American fast-food and coffee chains — including Yum Brands (YUM), McDonald's (MCD), and Starbucks (SBUX) — have a significant presence.

A measure of consumer staples stocks in China was the biggest loser among the benchmark CSI 300 Index's sub-groups on Monday, slumping 1.4%, according to Bloomberg News.

The move is part of a longer campaign by Xi to reduce official spending, curb corruption, and limit flashy displays of wealth.

In late 2023, the government told officials to "get used to belt-tightening" as it launched a major effort to reduce local government debt and free up resources for growth.

While the government has announced several stimulus measures, China’s economic recovery has been uneven.

For April, China’s industrial output rose by 6.1%, which was above expectations, but retail sales growth of 5.1% missed analyst estimates.

The iShares China Large-Cap ETF (FXI) has gained 18.6% year to date (YTD), while the Invesco QQQ Trust Series 1 (QQQ) and SPDR S&P 500 ETF (SPY) have risen 1.4% and 0.8%, respectively.

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