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*Known for its rapid economic growth during the past two decades, China is now navigating a period of moderated expansion. The current economic and societal landscape is marked by a complex interplay of challenges and opportunities: a significant real estate crisis, high youth unemployment rates, a shrinking and ageing population and newfound Asian pride. These factors are reshaping consumer behaviour and economic priorities within the country.

Despite these challenges, as stated by IADS’ partner NellyRodi in their What’s Up China conference held in Paris in October, there are sectors poised for growth, including sportswear, consumer health, and experiential travel. Understanding these dynamics and local macro-trends is crucial for businesses aiming to navigate the evolving Chinese market landscape effectively.*

China’s 2024 economic and societal context

It’s the economy, stupid!

China’s economic growth, once characterised by double-digit increases, has slowed considerably. While 2023 saw a modest recovery with a +5.2% GDP and a +7.2% consumption growth, there has been a -7.5% decrease in exports. The transition from rapid expansion to more moderate growth presents significant challenges illustrated by the 2024 economic landscape marked by a profound real estate crisis, slower consumption and an average 20% unemployment rate among the younger generations. Slowing down compared to 2023, China’s GDP only grew by +5% during the first half of 2024, while retail sales only increased by +3.7% during this period. The outlook for 2025 is both cautious and optimistic as GDP growth should resume. On its side, the IMF growth forecast sits at +4.5%.

Demographics: China is getting old 

The demographic shift is another key concern. China has now become the second-highest population in the world (it was previously the first), and the UN estimates that the country will lose 100 million by 2050. As a result, the replacement of the Chinese population is not guaranteed anymore. Overall, the total population could decrease from 911mn in 2025 to 700mn in 2050. Even more than its shrinking, the main issue is China’s population ageing rapidly, with a declining and historically low birth rate and an increasing proportion of the population over 65 years old. In 2023, more than 20% of the Chinese population was over 60 years old, and this group should reach 25% in 2050. Government initiatives to address this issue have had limited success so far. They have been distributing child benefits, extensively communicating on the birth rate and, since 2021, allowing all couples to have three children. Also, to maintain the workforce, the government raised the retirement age for the first time since the 1950s, from 50 to 55 for women in blue-collar jobs and from 55 to 58 for females in white-collar jobs. Men will see an increase from 60 to 63. The Chinese demographic future is brighter, though: bigger than Gen Z, the generation aged 5 to 15 now, will relieve demographic pressure in the coming years.

Western lifestyle 

The family structure is changing, with young people delaying marriage and parenthood, further complicating the demographic picture. The traditional family life model is challenged as the number of marriages decreased for 9 years, slowly rising again since 2023. Besides, the young population challenges the work status quo and no longer accepts the “9-9-6 model” (working from 9 am to 9 pm, 6 days a week). In 2021, the Supreme Court even ruled that this system was illegal. In reality, most of the Chinese population still works according to the model. Still, resistance is truly growing as people want a better work-life balance, with 76% of the population born after 2000 aspiring to a high level of flexibility. Freed time is dedicated to activities centred around well-being, sport and travel. Finally, 3-tier and 4-tier cities gain popularity among young adults as they offer a better lifestyle with less population and nature nearby.

Chinese consumer behaviour: myths and reality

The middle class is shrinking

Key to local consumption and once optimistic about the future, the Chinese middle class represented 400mn people in 2023. With 70% of family assets tied up in property, the current real estate crisis hits hard as 28,9% of the middle class lost 10% to 30% of their fortune, and 11.4% lost more than 30% of it. Now, many are even slipping back toward poverty. This is a significant issue for the Chinese Communist Party, which the middle class has always supported in exchange for prosperity.

Besides, Chinese starting salaries have declined by -1.3% during the 2023 fourth quarter, the most recent period for which data are available. Bonuses fell by -17.5% on average compared to the previous year (-27% in the internet and telecommunications sector and -35% in the financial sector), directly impacting consumption and luxury spending in 2024. It’s no secret that luxury brands face a major crisis, as illustrated by the latest LVMH results for 2024 third quarter: sales in Asia (excluding Japan) fell by 16%, while Japan — a key destination for Chinese customers leveraging a weak yen exchange rate — steeply decreased, growing 20% compared to 57% in the previous quarter.

Today, the middle class, whose aspirational customers once fueled the luxury growth, is more refined overall and has different needs and cravings, especially as they favour products and services that truly enhance their quality of life. As a result, other sectors benefit from the slowdown in luxury. The Chinese middle class invests in education, with an increase of +12.7% between 2022 and 2023. Quality food expenses grew by +8.5%, health by +9.2%, and travel by 7%.

The luxury shame impact on the HNWI and the UHNWI  consumption

The Chinese government has targeted influencers who flaunt their wealth on social media, resulting in bans for high-profile personalities. This has contributed to the ‘luxury shame’ phenomenon, where HNWIs and UHNWIs refrain from displaying their wealth. However, the HNWIs did not stop spending; instead, they shifted brands. They are becoming more discerning and opting for brands offering classics that retain value over time rather than trendy products. This is why brands like Hermès and The Row don’t experience slowdowns.

Also, McKinsey & Company describes a more nuanced picture of the luxury sector. While luxury brands are seeing their sales decline in mainland China, Chinese overseas spending on luxury goods in the first half of 2024 has already exceeded the 2019 level. Chinese consumers might simply choose to make these purchases outside of China. In parallel, UHNWIs tend to relocate outside of China. Their number in China shows a slowdown, from 495 billionaires in 2023 to 406 in 2024. Singapore and Tokyo’s real estate is booming thanks to those tentative relocations.

Asian tourism rather than Western tourism

In 2023, with $196.5bn spent, Chinese tourists became (again) the highest tourist spenders, but they completely shifted their tourism habits. Exit Europe and welcome Asia! They favour local tourism, as it’s easier, cheaper, and supported by the government's push for local consumption. Having a newfound Asian pride, tourists' top destinations in 2024 were Korea, Japan, USA, Thailand and Hong Kong. Italy ranked 10 and France… 23. Compared to 2019, Lunar New Year tourism in China increased by +73.1% in 2024. 765 million domestic trips were made across the country during the Golden Week holiday in October 2024, a year-on-year increase of 5.9%. Expenditure by domestic tourists reached $99.30bn, a year-on-year increase of 6.3%. However, per capita spending was 2.09% lower than before COVID-19.

China’s opportunities for growth

It’s not all bad

Despite historically low consumer confidence, concerns over high living costs, job security and the property slump, consumption growth still exists. Sportswear, urban outdoor apparel, and consumer health have seen double-digit growth. The beauty and wellness sectors present significant opportunities. The hospitality sector, particularly experiential travel and personalised services, also shows strong potential. The food and beverage sector, including alcohol-free options and gourmet products, offers promising avenues for growth.

Consumer segments worth watching

Despite high youth unemployment rates, the urban Gen Z remains optimistic about their financial future due to strong family support. They prioritise spending on dining out and cultural entertainment. Baby Boomers in tier-1 cities have benefited from past economic growth and hold positive consumption views despite low current consumption growth expectations. Millennials in tier-1 and tier-2 cities remain a significant growth engine for many companies but exhibit less confidence than their tier-3 counterparts. This confidence is attributed to lower living costs and better job security in tier-3 and tier-4 cities.

The macro trends identified by NellyRodi

These trends reveal a complex interplay of factors, including national pride, a growing focus on well-being, emotional shopping, personalisation, and digital technologies' influence.

• Local pride: “Guochao”, a new and strong sense of national pride, is driving increased demand for domestically produced goods and services. There is a strong shift in the perception of “Made in China.” It has been perceived negatively for many years and is now a symbol of pride. This is particularly evident in the sports and beauty sectors. This calls for non-Chinese brands to adapt culturally to compete with rising Chinese brands. The “Guochao” market should reach $388bn by 2028. Another striking example comes from Chinese sportswear brand Anta: their turnover in H1 2024 outpaced Nike by 20% and Adidas by 160%.
• The rise of women: contributing to the luxury market, Chinese women are increasingly entrepreneurs and members of company boards and, as such, become influential consumers, exhibiting independent spending habits and rejecting stereotypical marketing approaches.
• Well-being and health: they have become a top priority for Chinese consumers, driving demand for premium healthcare products, services (including plastic surgery), and experiences. Health is considered the ultimate luxury, reflecting the growing interest in mental health, holistic wellness, and preventative care. Also, China is the digital healthcare global leader (doctor-patient platforms, online pharmacies).
• Responsibility and sustainability: China’s CO2 emissions decreased by -65% between 2005 and 2023. Growing awareness of environmental issues drives demand for sustainable products (including second-hand) and eco-friendly practices, especially as consumers link durability to security and their aspiration for better times. Brands are increasingly incorporating sustainability into their marketing and product development strategies.
• Escapism: A desire for escape and personal growth fuels demand for travel, outdoor activities, and experiences that foster self-discovery. ‘City walks’ and the ‘20 minutes in the park’ movement gain traction, highlighting the role of nature in relieving stress.
• Ultra-digitalisation: China’s advanced digital infrastructure and the widespread adoption of online platforms are transforming the consumer landscape. The omnipresence of digital technologies in daily life impacts shopping experiences, brand engagement, and information access. There are countless platforms constantly evolving to increase innovation.
• Entertainment first: immersive experiences offering more than products have become necessary to enhance consumer engagement and brand loyalty. The use of augmented reality, virtual reality, and gamification is creating unique shopping experiences. Short-term pop-up shops and events are becoming increasingly popular, offering brands a way to generate buzz and engage consumers.
• Cultural and emotional elevation: a significant challenge for luxury brands is to define a specific ‘target emotion’ they want to evoke. Without this clarity, brands often resort to generic messaging that lacks impact. Brands should move beyond selling abstract dreams and instead focus on a precise emotional outcome. Emotional storytelling must be culturally relevant and shift from being brand-centric to client-centric. Brands should focus on authentic stories that resonate with their defined target emotion rather than relying on clichés like heritage or exclusivity.
• Regression and nostalgia: a trend towards regression and nostalgia is evident in the popularity of products and experiences that evoke childhood memories. The feeling of comfort and security gains traction in the Chinese context. This is reflected in collaborations with popular characters and brands.
• Service and personalisation: Consumers expect personalised service and unique experiences, which drive demand for one-to-one interactions, exclusive products, and customised offerings. 97% of Chinese consumers expect to be rewarded with special perks by brands during their shopping journeys.

China's economic environment presents notable challenges, and also offers opportunities for growth across various sectors. The evolving consumer behaviour highlights a shift towards quality of life improvements, with increased spending on education, health, and well-being. Moreover, the rise of national pride and sustainability concerns are redefining consumer expectations and market dynamics. As stated by NellyRodi, brands and retailers looking to succeed in China must adapt and understand that the value for consumers is no longer just determined by the products sold but by the brands’ ability to entertain, educate, anchor the brand in the culture, truly bring wellbeing and interact with consumers.

Credits: IADS (Christine Montard )