Analysis: The Puzzle of Beijing’s Faltering Consumer

Since the start of 2025, a marked divergence has emerged in the consumer economies of China’s major cities, with Beijing’s retail sales growth distinctly underperforming both the national average and other first-tier cities such as Shanghai, Guangzhou, and Shenzhen.[para. 1] This is unprecedented, as previous macroeconomic variables cannot fully account for why Beijing’s consumption growth has suddenly stalled when compared to its peers.[para. 1] Historically, Beijing and Shanghai exhibited parallel consumption patterns, even through the volatility of the 2020-2023 pandemic and recovery years. The recent divergence calls for deeper analysis beyond broad economic explanations.[para. 2]

Common hypotheses for Beijing’s malaise—slower income growth, population decreases, or a shrinking youth demographic—do not adequately explain the abruptness of the drop in 2025.[para. 3] Both Beijing and Shanghai experienced similarly synchronized income growth: Beijing’s per capita disposable income grew 4.5% in the first three quarters of 2025, just ahead of Shanghai’s 4.2%.[para. 4] Income structure and property market trends also remain comparable, with wages comprising around 64% of total income in both cities. Population outflows and consumption propensity gaps between Beijing and Shanghai have not notably changed,[para. 4] eliminating these as primary causes.[para. 4]

If macro fundamentals are steady, the decline in Beijing’s consumer economy appears structural. Four principal factors are identified:[para. 5] The first is auto sales. Both cities saw a downturn in auto sales in 2025 compared to a high base in prior years, but Beijing was hit particularly harshly. In the first ten months, auto sales in Beijing fell 16.1%, compared to just 2.9% in Shanghai.[para. 6] The difference can be traced to policy: Beijing restricts new car purchases through a stringent license-plate lottery, which sharply limited demand after the effects of temporary trade-in stimulus programs waned, while Shanghai’s more flexible approach buoyed its market.[para. 6]

Second, Beijing’s households bear heavier non-discretionary expenses (housing and medical care), restricting discretionary spending such as apparel and entertainment. Shanghai, being a commercial and fashion hub, maintains greater elasticity and willingness for discretionary consumption, which supports its retail sector.[para. 7]

The third factor is statistical: Beijing’s “headquarters economy” sees many corporations based there but with sales and logistics operations registered in other provinces. As a result, significant retail purchases by Beijing residents—from electronics to office supplies—are statistically recorded as sales elsewhere.[para. 8] For example, in 2025, retail sales of communication equipment in Beijing dropped 17.4% while rising 10.5% in Shanghai, accounting for a 2.4-point retail growth differential in one category alone.[para. 8] This indicates that real consumption by Beijing residents often isn’t reflected in local retail statistics.[para. 8]

Fourth, Beijing experiences less foot traffic. As measured by subway passenger volume—a proxy for urban retail activity—Beijing’s levels in the first eleven months of 2025 rebounded only to 90% of pre-pandemic 2019 levels, whereas Shanghai reached 96% and Guangzhou surpassed 100%.[para. 9] This shortfall aligns with shifts in Beijing’s economy, notably downturns in the internet and private education sectors whose workers previously drove public transit use.[para. 9] Moreover, Shanghai benefits from increased international visitors, injecting more spending into its economy.[para. 9]

Despite these challenges, there are positive signs. Consumer confidence in future employment and income has been rising since early 2025, and certain retail sectors (notably gold and jewelry) remain strong. Notably, retail sales in Beijing rose 12.6% year-on-year in October, hinting at underlying pent-up demand.[para. 10]

The broader implication is that uniform stimulus policies are no longer effective. As China transitions to more targeted approaches, each city must develop strategies tailored to its own unique economic structure and reality. For Beijing, this includes easing restrictive purchase regulations, improving high-end retail offerings, and addressing statistical issues so consumption is properly measured. For the nation, precision-guided, city-specific policy is the way forward.[para. 11]