Weekend Long Read: How China’s Slowing Economy Is Shaking Up Consumer Spending Habits

China's consumer market is undergoing significant transformation as the country faces economic headwinds, including slowed growth, weak domestic demand, and an aging population. These dynamics have caused a decline in traditional consumption—especially in sectors like real estate, automobiles, furniture, and large retail stores—while highlighting new opportunities for businesses willing to adapt to the shifting landscape. Opportunities are arising in sectors such as tourism, health, entertainment, and service consumption increasingly centered on third- and fourth-tier cities near metropolitan areas [para. 1][para. 2][para. 3][para. 4][para. 5].

The first major trend is a shift away from big-ticket, long-cycle spending toward faster, value-for-money (cost-effective) purchases. While traditional expenditures on houses and cars have plummeted, consumers now focus on affordability and cost-effectiveness, seeking products and services that deliver essential value without unnecessary extras. This mirrors Japan's experience during its economic slowdown, where affordable brands and quick-turnaround consumption outpaced pricier alternatives. In China, brands like Luckin Coffee and Mixue Bingcheng, as well as companies like Miniso, are thriving by offering good value, efficient design, and frequent product updates. Consumers are also switching from international brands to domestic options in sectors like cosmetics and electronics, driven by nationalism and greater confidence in local products as economic growth slows and rational consumption gains ground [para. 7][para. 8][para. 9][para. 10][para. 11][para. 12][para. 13][para. 14][para. 15][para. 16][para. 17].

Secondly, consumption is shifting from high-tier metropolitan centers to nearby lower-tier cities, particularly in tourism and the service sector. In 2024, rural consumption grew by 4.3%, outpacing the 3.4% growth in urban areas. Major cities like Shanghai and Beijing saw retail sales fall by 3.1% and 2.7%, respectively. This divergence is primarily because residents in higher-tier cities are more sensitive to macroeconomic and income changes and more exposed to the real estate downturn and declining investments. As these residents shift from big-ticket purchases to spending on travel and dining in close-by cities, lower-tier cities within an hour of megacities are set to benefit [para. 18][para. 19][para. 20][para. 21][para. 22][para. 23][para. 24][para. 25][para. 26].

The third trend is a move from durable and discretionary goods (like cars, appliances, and jewelry) toward essential and service-based consumption (such as food and communication devices). As China enters a post-industrial, post-urbanization, and post-real estate era, with an aging population, big-ticket item sales decline. However, the market is expected to pivot toward niche, personal appliances and health-focused consumption [para. 27][para. 28][para. 29][para. 30].

Fourth, there’s a shift from large department stores and luxury brands to “small, beautiful, and specialized” retailers. Convenience stores, specialty shops, and online stores are poised for growth as consumers prioritize efficiency, individuality, and internal value amid economic pressures and demographic shifts [para. 31][para. 32][para. 33][para. 34].

Finally, consumers are increasingly seeking diversified, personalized experiences over standardized material goods. With a slowing economy and rising focus on health, wellness, and inner well-being, future opportunities lie in sectors like fitness, yoga, wellness tourism, skin and nail care, and healthy foods and beverages. This structural consumption upgrade favors higher-quality, tech-enabled, and psychologically enriching products and services over mere quantity or luxury [para. 35][para. 36][para. 37][para. 38][para. 39][para. 40][para. 41][para. 42][para. 43][para. 44][para. 45].

Overall, these trends underscore how China’s economic transition is driving deep changes in consumer psychology, behavior, and business opportunities [para. 46].