China Golden Week update: So far, really good

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If the first two days of China's annual Golden Week holidays are anything to go by, consumer confidence in the world's second-largest economy is strong.

Golden Week, a seven-day holiday starting on October 1 - China's National Day - is a key period for travel, shopping and dining out in the mainland. The holiday period is used as a gauge of consumer sentiment in the country.

"Golden Week has been quite golden so far. Tourism data came in strong for the first two days," said Ting Lu, China economist at Bank of America Merrill Lynch.

The number of visitors to the nation's top 125 tourist attractions hit 8.4 million during the first two days of the holiday period, up 18.8 percent compared with the same period last year. Total tourism revenue from these attractions surged 26.6 percent on-year to 437 million yuan ($71 million).

(Read More: China tourism set for boom like Japan in the '80s)

"The growth in the number of tourists is more impressive if we consider the fact that the capacities of those tourist attractions are limited," Lu added.

Lu said the strong data reflects a combination of stable employment and solid wage growth, and is in line with the government's efforts to rebalance from an investment-driven to a consumption-based economy.

"Individual trips could be partially bolstered by the wealth effect, as home prices have been soaring so far this year," he said.

In September, the average price of new homes in 100 cities rose 9.5 percent on-year to 10,554 yuan ($1,724) per square meter, according to the China Index Academy.

Government policies have also encouraged increased domestic travel, with highway tolls waived during the holiday period for vehicles with up to seven seats.

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The National Development and Reform Commission's (NDRC) 2.8 percent fuel-price reduction on September 30 was another encouraging factor.

Outbound travel

While the majority of Chinese travel within the mainland during this period, there is evidence of growing outbound tourism.

(Read More: A nation on vacation: China's Golden Week holidays begin)

On October 1, over 102,000 mainland visitors traveled to Macau - a 16 percent on-year rise, according to the Macau Government Tourist Office.

In fact, the rise in overseas travel even prompted Chinese authorities to issue a 64-page guidebook filled with travel "do's" and "don'ts" when going abroad. The guide suggested that travelers should not urinate in pools or steal airplane life jackets, according to a report by news agency AFP on Wednesday.

Preferred destinations for the Golden Week holidays include South Korea, Singapore, Cambodia and Thailand, according to travel agents surveyed in Beijing. However, for the wealthier Chinese, the U.K. and U.S. are also popular options.

As a result, overseas retailers are gearing up for a solid week of sales. Westfield London, a shopping mall operator, for example, said it expects an influx of Chinese tourists this week.

(Read More: Chinese tourists warned not to pick noses or urinate in public)

"Chinese visitors have started to develop more eclectic and sophisticated tastes over the last five years and now buy across luxury and non-luxury British brands," said Myf Ryan, marketing director for the U.K. and Europe at Westfield.

Luxury retailers at the shopping center are tailoring offerings for the occasion, with Gucci displaying more precious skin handbags and Jimmy Choo featuring a number of limited edition pieces.

In October 2012 during Golden Week, Chinese tourists accounted for 35 percent of sales in The Village, Westfield London's luxury quarter.

By CNBC's Ansuya Harjani; Follow her on Twitter @Ansuya_H

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