Chinese Consumption Trends 2025: From Rebound to Rebuild
Less Gucci, More Groceries? Not Quite.
Good Morning!
The Chinese consumer isn’t collapsing. They’re just… changing. After three chaotic years of lockdowns, revenge spending, and economic recalibration, we’re finally seeing what “normal” looks like—and it’s not quite what the consensus expected. Retail sales are growing. Services are surging. But household caution runs deep, and the 2025 recovery is less about a shopping spree and more about quiet recalibration.
This report is the third instalment in our 2025 China Macro Series, following our deep dives into industrial policy and the property sector. In this note, we turn to China's consumer economy—arguably the most watched and most misunderstood pillar of the post-COVID recovery.
This is part three of Macro Week here on Panda Perspectives — our three-part series on the structural shifts shaping China’s economy.
🛍️ Today’s post is the deep dive on consumers. If you’ve been trying to square resilient data with bearish sentiment, or just figure out where the next leg of growth might come from — this one’s for you.
📈 If you missed parts one and two — our 2025 Macroeconomic Outlook and the China Property Deep Dive — you can catch up here and here.
This post is free to read — but to go deeper, consider subscribing. Paid members get access to our investor briefings, model portfolios, data visuals, and sector-level insights across China and Asia.
This weekend we’ll be doing our usual China Weekly Wrap and Panda Portfolio Review segments, so do sign up to get those.
Serious about Asia investing? Your process needs more Panda. We full appreciate that for some this is not enough and you’d like a more personalised service that will help get results in China and Asia. Currently we’re doing calls on China consumer, 2Q25 Outlook and yes, Robotics. See what we offer here, and connect with us today or message us directly.
Nothing in this Substack is Investment Advice. This information is provided for informational purposes only and does not constitute financial, investment, or other advice. Any examples used are for illustrative purposes only and do not reflect actual recommendations. Please consult a licensed financial advisor or conduct your own research before making any investment decisions. The authors, publishers, and affiliates of this content do not guarantee the accuracy, completeness, or suitability of the information and are not responsible for any losses, damages, or actions taken based on this information. Past performance is not indicative of future results.
The Setup: Where the Chinese Consumer Stands Today
China remains the world’s largest consumer market in purchasing power parity (PPP) terms, and its role in global consumption will only grow in the coming decade. But the contours of that growth are changing fast. While some see stagnation, we see segmentation—between generations, across city tiers, and among product categories. Our goal is to unpack that complexity and provide investors with a data-driven lens on where resilience lies and where risks remain.
Consumers are trading down in some categories, splurging in others. E-commerce is still eating the world, but offline retail is making a surprising comeback in lower-tier cities. Confidence is climbing, but unevenly. The big theme? Segmentation. Between young and old. Between Beijing and Chengdu. Between luxury, mass market, and a growing “good enough” middle.
This report outlines the current state of consumption, explores evolving consumer preferences, and highlights investable sub-segments within the broader landscape. As with our previous publications, we aim to move beyond headlines and offer a forward-looking framework grounded in facts.
E-commerce continues to lead growth, but a nuanced picture is emerging. Offline retail, particularly in lower-tier cities, is showing signs of life as experiential retail formats and local brands gain traction. Online channels continue to outperform offline retail, while services consumption outpaces goods. Despite this positive momentum, sustainability concerns remain as the sector faces external headwinds from trade tensions and market volatility.
To understand the structural drivers behind this resilience, we start with China’s evolving position as the world’s largest consumer market.
How China Became the World’s Largest Consumer Market in PPP Terms
China has firmly established itself as the world's largest consumer economy when measured in purchasing power parity (PPP) terms, representing a transformative shift in the global economic landscape. While the United States remains larger in nominal dollar terms, China's massive population base and rapidly expanding middle class have created an unparalleled consumption engine that is reshaping global markets and business strategies.
The sheer scale of China's consumer market is staggering. With a consumer class of approximately 899 million people, China has nearly twice the number of consumers as India (473 million) and significantly more than the United States. This consumer base is projected to expand to over 1 billion by 2030, representing a 15% increase from current levels. The country's total retail sales of consumer goods reached approximately 48.8 trillion yuan (about $6.7 trillion) in 2024, maintaining its position as the world's largest e-commerce market for over a decade.
What makes China's consumer market particularly significant is not just its size but its growth trajectory. Over the next decade, China is expected to add more consumption than any other country globally, generating more than one-quarter of all global consumption growth according to McKinsey projections. This growth is being driven by the continued expansion of the middle and upper-middle classes, with approximately 400 million households expected to reach upper-middle and higher income levels by 2030—roughly equivalent to the combined total in Europe and the United States.
The wealth creation within this massive consumer base is equally impressive. The number of millionaires in China is projected to double from approximately 5 million today to 10 million by 2025, creating an increasingly affluent segment with substantial discretionary spending power. This rapid wealth accumulation is enabling Chinese consumers to "punch above their weight" in global consumption terms. While China generates about 17% of global GDP, it accounts for a significantly larger share of consumption in several categories, particularly discretionary spending areas such as fashion, accessories, consumer electronics, and electric vehicles.
China's consumer market still has substantial room for growth. Household consumption currently represents approximately 38% of GDP, compared to around 50% for the Asia-Pacific region as a whole, 52% in the European Union, and 68% in the United States. This gap is partly explained by China's traditionally high savings rate and significant real estate investment by households. However, as the financial system becomes more sophisticated and policy directions shift toward encouraging consumption, this balance is expected to gradually change, unlocking even greater consumption potential.
2025 Snapshot: The Health of the Chinese Consumer Economy
The Chinese consumer enters 2025 in a state of cautious optimism, gradually recovering confidence after several challenging years marked by economic uncertainty, property market corrections, and lingering effects of pandemic disruptions. Consumer confidence indices have shown consistent improvement since late 2024, with the official index reaching 104.5 in March 2025, up from 98.2 a year earlier, though still below the pre-pandemic levels of 110-115.
Recent retail sales data for Q1 2025 shows growth of 4.6% year-over-year, a notable improvement from the 3.5% growth in the previous quarter. This acceleration suggests a rebound in consumer confidence and spending, with government initiatives such as consumption vouchers and subsidies likely contributing to the uptick in retail activity.
Household balance sheets remain relatively healthy despite property market pressures, with the average household debt-to-income ratio stabilizing at approximately 120%, below levels seen in many developed economies. Savings rates remain elevated at around 34% of disposable income, reflecting continued caution and cultural preferences for financial security, though there are early signs of willingness to deploy some of these savings toward consumption.
Consumption as a percentage of GDP has continued its gradual structural increase, reaching approximately 55% in early 2025, up from 53% in 2023 and 51% in 2020. This progression, while slower than policymakers had hoped, reflects the ongoing rebalancing of China's economy toward a more consumption-driven model. The government's emphasis on "high-quality development" and "common prosperity" continues to support this transition, with policies increasingly focused on boosting household income and consumption.
The urban-rural consumer divide remains significant but is gradually narrowing, with rural consumption growing at 6-7% year-over-year, outpacing urban consumption growth of 4-5%. This convergence reflects both policy support for rural development and the expansion of e-commerce and logistics networks into less developed areas, improving product availability and price competitiveness.
The post-pandemic consumption recovery has been uneven across categories, with services rebounding more strongly than goods, and essential categories showing greater resilience than discretionary spending. Travel, dining, and entertainment have seen particularly strong recovery in early 2025, with spending in these categories now exceeding pre-pandemic levels in tier-1 and tier-2 cities, though still lagging in smaller markets.
Where China’s Consumer Spending Is Growing Fastest in 2025
Several consumer categories have emerged as clear growth leaders in 2025, outperforming the broader retail market and offering attractive opportunities for businesses and investors.
Health and wellness products and services continue to experience robust growth, with spending increasing by 10-12% year-over-year. This category encompasses a wide range of offerings, from nutritional supplements and fitness equipment to preventive healthcare services and wellness tourism. The pandemic has accelerated Chinese consumers' focus on health, creating lasting behavioral changes that continue to drive spending in this area.
Domestic travel has rebounded strongly, with spending up approximately 15% year-over-year in Q1 2025. This growth reflects both pent-up demand and the redirection of spending that previously went to international travel, which remains below pre-pandemic levels due to lingering travel restrictions and changed consumer preferences. Premium domestic destinations and experiences have been particular beneficiaries, with luxury hotels and resorts in popular destinations reporting occupancy rates exceeding 80% during peak periods.
Digital content and services continue to expand rapidly, with spending on online entertainment, education, and information services growing by 12-15% year-over-year. Gaming, short-form video, and subscription-based content platforms have been particularly successful in monetizing China's vast online population, with average revenue per user increasing by 8-10% annually as consumers become more willing to pay for quality digital experiences.
Premium and luxury goods have shown resilience despite broader economic uncertainties, with sales growing by 6-8% year-over-year. This segment has benefited from the "stay-at-home economy" effect, with some consumers redirecting spending from services to higher-quality goods during periods of reduced mobility. The continued expansion of China's upper-middle class, now estimated at 400-450 million people, provides a solid foundation for premium consumption growth.
Services consumption has outpaced goods consumption, growing at approximately 7% year-over-year compared to 3-4% for physical products. This shift reflects both the maturation of China's consumer economy and changing preferences, particularly among younger consumers who increasingly value experiences over possessions. Personal services, education, healthcare, and recreation have been particular beneficiaries of this trend.
Headwinds for Chinese Consumers: Income Pressure, Confidence Gaps
Despite the generally improving consumer landscape, several challenges and pain points continue to constrain spending and shape behaviour in 2025.
Housing costs remain a significant burden for many households, particularly in tier-1 and strong tier-2 cities where housing price-to-income ratios remain elevated despite recent market corrections. Mortgage payments typically consume 40-50% of disposable income for young homeowners in major cities, limiting their ability to spend on discretionary categories. The government's efforts to stabilize the property market have helped prevent further deterioration but have not fundamentally resolved affordability challenges.
Education and healthcare costs continue to rise faster than overall inflation, creating financial pressure for families. Despite government efforts to control education costs through the "double reduction" policy and other measures, families still allocate substantial resources to supplementary education and tutoring, particularly in competitive urban environments. Healthcare expenditures have increased by 8-10% annually, reflecting both rising demand for quality care and the gradual shift from public to private provision for those who can afford it.
Youth unemployment remains elevated at approximately 12-13%, though down from the peaks of 15-16% seen in 2023. This challenge particularly affects recent graduates and young urban residents, constraining their consumption potential during key formation years for spending habits. The mismatch between education outcomes and labor market needs continues to contribute to this structural issue, though government initiatives to promote entrepreneurship and vocational training have shown some positive results.
Regional economic disparities continue to create vastly different consumption environments across China. While consumers in the Greater Bay Area, Yangtze River Delta, and Beijing-Tianjin-Hebei region enjoy income levels and consumption options comparable to developed economies, those in central and western regions face more limited opportunities and spending power. This disparity is reflected in consumption patterns, with premium and discretionary spending heavily concentrated in eastern coastal regions.
Economic uncertainty continues to influence consumer behavior, with many households maintaining precautionary savings despite improving conditions. Concerns about future income stability, healthcare costs, and retirement security contribute to this cautious approach, particularly among middle-aged consumers. The government's efforts to strengthen social safety nets have made some progress but have not yet created sufficient confidence to fundamentally change saving behaviours.
How Inflation Is Shaping China’s Consumption Patterns
China's inflation environment has shifted from deflationary concerns in 2024 to modest inflation in 2025, with varying impacts across consumer categories and behaviors.
Food price inflation has accelerated to approximately 2.5-3.0% year-over-year in early 2025, up from near-zero or negative rates throughout much of 2024. This increase reflects both recovering demand and supply-side factors, including weather events affecting agricultural production and rising input costs. Fresh vegetables, meat, and dairy products have seen the most significant price increases, while staple grains have remained relatively stable due to sufficient reserves and government price controls.
Non-food inflation remains more subdued at approximately 0.5-1.0%, though with significant variation across categories. Services inflation has accelerated to 2-3%, reflecting labor cost pressures and recovering demand, while durable goods prices continue to decline by 1-2% annually due to overcapacity and technological improvements. Apparel and household goods occupy a middle ground, with prices increasing by 0-1% as manufacturers gradually regain some pricing power.
Consumer responses to price increases have been nuanced and category-specific. For essential items like food and household necessities, consumers have shown relatively low price elasticity, absorbing moderate increases without significantly reducing volumes. However, they have demonstrated increased price sensitivity for discretionary purchases, often trading down to more affordable options or delaying purchases when faced with substantial price increases.
Trading down behaviors are most evident in packaged foods, household products, and apparel, where consumers are increasingly choosing private label or value-oriented brands without perceiving significant quality compromises. Conversely, trading up continues in categories perceived as directly impacting health, wellbeing, or status, including premium food and beverages, skincare, and selected luxury goods.
Price sensitivity varies significantly across consumer segments, with lower-income households (annual income below RMB100,000) showing high sensitivity across most categories, while affluent consumers (annual income above RMB500,000) remain relatively insulated from moderate price increases. The vast middle-income segment displays category-specific behaviours, economising on basics while maintaining or increasing spending on priority areas like children's education, health, and occasional indulgences.
Online vs Offline Retail in China: What’s Winning in 2025
The evolution of China's retail landscape continues in 2025, with digital and physical channels increasingly integrated while maintaining distinct growth trajectories and characteristics.
E-commerce penetration has reached approximately 30% of total retail sales, up from 27% in 2023, though growth rates have moderated as the channel matures. Category penetration varies widely, exceeding 50% in apparel, electronics, and beauty products, while remaining below 15% in fresh food, furniture, and automotive. The convenience, price transparency, and product selection of online channels continue to drive consumer preference, particularly among younger and urban demographics.
Social commerce has emerged as a major growth driver, accounting for approximately 20% of online sales in 2025. Platforms combining entertainment, social interaction, and shopping have proven particularly effective at engaging consumers and driving impulse purchases. Key formats include live streaming (growing at 20-25% annually), community group buying (15-20% growth), and content-driven recommendation commerce (25-30% growth).
Brick-and-mortar retail is undergoing significant transformation rather than simple decline, with successful physical retailers focusing on experience, service, and community rather than merely product distribution. Department stores have continued to struggle, with floor space declining by 5-7% annually, while shopping malls have stabilized by increasing their allocation to food, entertainment, and services (now typically 40-45% of mall space, up from 30-35% in 2020).
Omnichannel strategies have become essential for retail success, with the boundaries between online and offline continuing to blur. "Online-to-offline" (O2O) services have expanded beyond food delivery to encompass grocery, pharmacy, and convenience store products, typically promising delivery within 30-60 minutes. Meanwhile, "offline-to-online" integration has advanced through in-store digital experiences, QR code shopping, and seamless inventory visibility across channels.
Mobile payment and digital wallet adoption has reached near-universal levels in urban China, with over 90% of consumers regularly using services like Alipay and WeChat Pay. Transaction values continue to grow at 15-20% annually, expanding beyond retail to encompass virtually all consumer payment scenarios. The integration of payment with broader financial services, loyalty programs, and social features has created powerful ecosystems that shape consumer behavior across multiple dimensions.
Chinese Household Finances: Income, Savings, and Spending Behaviour
Income growth has stabilised in 2025 after a period of deceleration, providing a more solid foundation for consumption expansion.
Income growth trends show nominal urban disposable income increasing by approximately 5-6% year-over-year in early 2025, while rural incomes are growing slightly faster at 6-7%. When adjusted for inflation, real income growth stands at 4-5%, a modest improvement from the 3-4% rates seen in 2023-2024. This acceleration reflects both policy efforts to boost household income and the gradual normalization of economic activity.
Wealth distribution remains highly uneven, with the top 10% of households controlling approximately 65% of household wealth, though government "common prosperity" initiatives have begun to address this imbalance through tax reforms, expanded social services, and targeted support for lower-income groups. The middle class continues to expand, now encompassing approximately 400-450 million people with annual household incomes between RMB150,000 and RMB500,000.
Savings rate trends show early signs of moderation, with the household savings rate declining slightly to 34% of disposable income, down from 36% in 2023. This modest reduction reflects improving consumer confidence and the gradual strengthening of social safety nets, though cultural preferences for financial security and intergenerational wealth transfer continue to support high savings relative to developed economies.
Investment preferences of Chinese households have evolved in response to property market uncertainties, with increased allocation to financial assets including wealth management products (now accounting for approximately 25% of household financial assets), mutual funds (15%), and direct equity investments (10%). This diversification away from the traditional focus on property investment represents a significant shift in household financial behavior, though real estate still accounts for approximately 60% of total household assets.
We believe Chinese households have both the capacity and the means to consume more. Despite recent market turbulence, income levels remain stable, household savings are high, and property values — the core of household wealth — have broadly stabilized. Equity market volatility may dent short-term sentiment, but the impact on consumption should be limited given relatively low direct equity ownership. More importantly, we see the foundations for a virtuous cycle: a bullish view on Chinese assets, particularly equities, implies a rising wealth effect over time — one that can unlock more discretionary spending, reinforce consumer confidence, and compound upside for both markets and the real economy. In short, our optimism on Chinese consumption is closely linked to our optimism on Chinese assets.
Tracking Consumer Confidence in China: What the Data Shows
Consumer confidence has shown a gradual but uneven recovery in 2025, with significant variations across demographic groups and regions.
Official consumer confidence indices have improved consistently since late 2024, with the National Bureau of Statistics Consumer Confidence Index reaching 104.5 in March 2025, up from 98.2 a year earlier. This improvement reflects both actual economic conditions and the psychological impact of policy support measures, though confidence remains below the pre-pandemic levels of 110-115.
Private sector surveys show similar trends but highlight significant demographic variations. Confidence among urban, higher-income consumers (annual household income above RMB300,000) has recovered more strongly, reaching approximately 90% of pre-pandemic levels, while middle and lower-income groups show more modest improvements, reflecting their greater vulnerability to economic uncertainties and inflation pressures.
Regional confidence patterns reveal stronger sentiment in eastern coastal regions, particularly the Yangtze River Delta and Greater Bay Area, where economic recovery has been more robust and employment opportunities more plentiful. Central and western regions show more subdued confidence levels, though the gap has narrowed somewhat as policy support has increasingly targeted less developed areas.
Forward-looking indicators suggest cautious optimism, with approximately 35% of consumers expecting their financial situation to improve in the next 12 months, up from 30% in 2024. However, this optimism is tempered by continued concerns about housing costs, education expenses, healthcare, and retirement security, particularly among middle-aged consumers with family responsibilities.
The recent retail sales data for Q1 2025 showing growth of 4.6% year-over-year, an improvement from the 3.5% growth in the previous quarter, aligns with these confidence indicators and suggests that consumer spending is gradually recovering momentum. This retail sales acceleration suggests a rebound in consumer confidence and spending, with government initiatives such as consumption vouchers and subsidies likely contributing to the uptick in retail activity.
Luxury vs Mass Market: Polarisation in Chinese Consumer Preferences
The divergence between luxury and mass market consumption has intensified in 2025, creating distinct market dynamics and opportunities.
Luxury market performance has remained resilient despite broader economic uncertainties, with sales growing by 6-8% year-over-year in Q1 2025. This strength reflects several factors, including the relative insulation of wealthy consumers from economic pressures, the "revenge spending" phenomenon as social activities normalize, and the repatriation of luxury spending that previously occurred during international travel.
Category performance within luxury shows significant variation, with accessories, jewelry, and cosmetics outperforming apparel and watches. This pattern reflects both changing consumer preferences and the varying price elasticity across categories, with more visible, logo-driven products generally showing stronger performance than subtle, connoisseur-oriented items.
The mass market presents a more challenging picture, with growth of 2-3% year-over-year in Q1 2025, though this represents an improvement from the 1-2% growth seen throughout much of 2024. Value-oriented retailers and brands have generally outperformed mid-market players, reflecting increased price sensitivity among middle-income consumers who are trading down in non-priority categories while maintaining spending on essentials and occasional indulgences.
The "premium mass" segment has emerged as a particularly dynamic market space, offering quality and status at more accessible price points than traditional luxury. This segment, encompassing contemporary fashion, accessible luxury accessories, premium beauty, and upgraded everyday products, has grown by 8-10% year-over-year, outpacing both traditional luxury and the broader mass market.
Domestic brands have continued to gain market share across both luxury and mass segments, benefiting from improving product quality, more sophisticated marketing, and growing consumer nationalism. In categories like beauty, apparel, and consumer electronics, leading domestic brands now command 40-50% market share, up from 30-35% in 2020, though international brands maintain stronger positions in premium and luxury segments.
China’s Consumption Divide: Tier 1 vs Lower-Tier Cities
Regional consumption patterns in China continue to show significant divergence in 2025, reflecting varying levels of economic development, cultural differences, and policy impacts.
Tier-1 cities (Beijing, Shanghai, Guangzhou, Shenzhen) maintain their position as consumption powerhouses, with per capita retail sales approximately 2.5-3x the national average. These markets are characterized by sophisticated consumers, high penetration of premium and luxury products, and advanced retail formats. Recent consumption growth in these cities has been driven primarily by services, experiences, and digital content rather than physical goods, reflecting the maturation of these markets.
Strong tier-2 cities, particularly provincial capitals and economically vibrant coastal cities like Hangzhou, Nanjing, and Xiamen, have shown the fastest consumption growth at 6-7% year-over-year, outpacing both tier-1 cities (4-5%) and the national average (4.6%). These markets benefit from lower living costs than tier-1 cities, strong economic fundamentals, and growing middle-class populations with significant discretionary spending power.
Lower-tier cities and rural areas present a more mixed picture, with consumption growth varying significantly based on local economic conditions, industrial base, and proximity to major urban centers. Rural consumption has grown at 6-7% year-over-year, outpacing urban consumption, though from a much lower base. This growth has been supported by rising agricultural incomes, improved logistics networks, and targeted policy support for rural development.
The regional consumption gap, while still substantial, has shown signs of gradual narrowing. Per capita retail sales in tier-3 and tier-4 cities have grown at approximately 1.5x the rate of tier-1 cities, reflecting both catch-up effects and the expansion of modern retail formats and e-commerce into less developed areas. This convergence aligns with government objectives to reduce regional disparities and create more balanced development.
E-commerce has played a crucial role in reducing regional consumption disparities, providing consumers in lower-tier cities and rural areas with access to product selection and price transparency previously available only in major urban centers. Online penetration in tier-3 and smaller cities has reached approximately 25% of retail sales, compared to 35% in tier-1 cities, with the gap continuing to narrow.
The Role of Credit in China’s Consumer Recovery
Consumer credit has continued to expand in 2025, though at a more moderate pace than in previous years, reflecting both regulatory tightening and changing consumer attitudes.
Credit card penetration has reached approximately 55% of the adult urban population, up from 50% in 2023, though usage patterns have evolved toward greater caution. Average monthly spending per active card has increased by 3-4% year-over-year, below the growth rate of disposable income, while revolving balances have declined slightly as consumers prioritize debt reduction.
Consumer loans have grown by approximately 8% year-over-year, a moderation from the double-digit growth rates seen in previous years. This deceleration reflects both regulatory measures to control household leverage and more cautious consumer attitudes toward debt accumulation. Mortgage lending has stabilized after the property market correction, while auto loans and general-purpose consumer loans have shown modest growth.
Buy-now-pay-later (BNPL) services have gained significant traction, particularly among younger consumers, with transaction values growing by 25-30% year-over-year. These services have expanded beyond their initial focus on electronics and apparel to encompass a wider range of categories, including travel, education, and healthcare, offering consumers greater flexibility in managing expenditures.
Regulatory oversight of consumer finance has intensified, with authorities implementing stricter requirements for credit scoring, loan approval processes, and interest rate caps. These measures aim to prevent excessive household leverage while ensuring responsible lending practices, particularly for vulnerable consumer segments.
Financial inclusion initiatives have expanded access to formal credit for previously underserved populations, including rural residents, migrant workers, and small business owners. Digital finance platforms have played a crucial role in this expansion, leveraging alternative data sources and automated underwriting to assess creditworthiness beyond traditional metrics.
*Visualization note: Multi-panel chart showing consumer credit trends, including growth rates by product type, delinquency rates, and penetration across different demographic groups*
Panda Perspective: Themes and Sector Plays
The Chinese consumer story in 2025 is one of quiet strength, emerging segmentation, and investable resilience. With Q1 retail sales growing 4.6% year-over-year—up from 3.5% in the previous quarter—the momentum is shifting. Confidence is gradually recovering, helped by stabilizing employment, targeted policy support (like consumption vouchers and subsidies), and an evolving consumer psyche that is more value-conscious, health-focused, and digitally embedded than ever before.
As the world’s largest consumer economy in PPP terms, China is expected to contribute more than one-quarter of global consumption growth over the next decade. But this growth won’t look like the old playbook of volume-driven expansion. Instead, investors should expect a new consumption model: one defined by premiumization, localization, digital ecosystems, and health-centric priorities.
Near-Term Outlook (6–12 months)
We expect retail sales to grow 5–6% in 2025, with services outpacing goods and online platforms maintaining share gains. Consumption growth should remain gradual but positive, supported by modest real income increases, improving labor markets, and further policy nudges toward household spending.
Medium-Term Outlook (2–3 years)
The real opportunity lies in structural transformation. Expect rising demand in premium categories, healthcare and wellness, tech-enabled services, and experience-driven consumption. Annual consumption growth of 6–7% appears realistic, with consumption playing a greater role in overall GDP growth.
Investable Themes
Consumer Staples: Companies with strong brand equity, efficient distribution, and innovation—especially in categories like dairy, packaged foods, and beverages—are well-placed to benefit from both price-sensitive demand and trading-up dynamics.
Discretionary Retail: The middle market is being squeezed, but brands at the premium and value ends are outperforming. Winning models emphasize segmentation, omnichannel reach, and personalization.
Digital Platforms: Content-driven platforms that blend entertainment, commerce, and community are capturing disproportionate attention and spend. Pure e-commerce is maturing; the future lies in integration.
Healthcare & Wellness: A structural growth story, with 10–12% expected annual growth. Categories like preventive care, nutrition, fitness, and mental wellness offer compelling upside—especially via digital-first delivery models.
Policy and Structural Considerations
Demographic headwinds, high urban housing costs, and weak safety nets remain challenges—but they are increasingly being addressed. Policy is now explicitly focused on supporting consumption, with reforms aimed at middle-income households, expanded social services, and rural spending support, all aligned with the “common prosperity” agenda.
The Investor Angle
We are bullish on Chinese assets—and that includes equities. Our view on the consumer sector is not just informed by macro data, but also reinforced by our belief in a coming wealth effect. Rising equity markets (and asset values more broadly) support confidence and spending capacity, especially over time. While direct equity ownership remains limited compared to property, the broader household balance sheet remains strong. In our view, the consumption recovery is both a reflection of and a contributor to our optimism on China’s long-term growth story.
For investors, the opportunity lies in distinguishing between cyclical rebounds and structural transformations—especially in segments tied to rising affluence, digital ecosystems, and aging demographics.
🧭 To dive deeper into the themes, company-level ideas, and tactical positioning we’re pursuing, consider subscribing to the paid section of Panda Perspectives — or reach out to become a client of Panda Perspectives Inc. We offer advisory calls, model portfolios, and custom briefings for institutional investors serious about Asia.
✨ And if you’ve made it this far, you’re clearly one of us — so at the very least hit that subscribe button. The real insights are just getting started.