The latest economic data from China highlights an intriguing moment in its current cycleAccording to the National Bureau of Statistics, China's GDP growth for the first three quarters of 2024 stands at 4.8%, consistent with previous market forecastsHowever, a deeper look into the trends within consumer spending reveals some growing apprehensionsEconomic uncertainty has tempered both consumer confidence and discretionary spending, resulting in only modest growth rates in GDP driven by consumer expenditure.

Over the recent months, Chinese household consumption has shown signs of taperingDuring the first three quarters of the year, retail sales of consumer goods demonstrated a cumulative year-on-year growth of merely 3.3%. This represents a 3.5% decline compared to the elevated figures observed during the same period in 2023. Additionally, this growth rate slightly lags behind the average growth rate of 3.7% from 2022 and 2023. Final household consumption expenditure contributed 2.4% to GDP growth, down 2% from 2023's performance, with the average contribution in the prior two years being 2.8%. Specifically, the retail growth rates for consumer goods in the first three quarters were recorded at 3.1%, 2.6%, and 2.7% respectively, reflecting a gradual decline.

Following July, policies began to shift their focus towards enhancing the quality of life and stimulating consumption

In September, the month-on-month retail growth rebounded to 3.2%, a 1.1% increase over August, showing marginal signs of recoveryPredictions indicate that by the fourth quarter, the impacts of consumption-promoting policies may become more prominent, supporting a steady recovery in consumer activity.

Examining the composition of consumer spending reveals a notable division between services and goodsNotably, the growth rates of dining services and retail goods have narrowed considerably since the start of the year, dropping from a 7.9% difference in early statistics to just 1.4% by AugustFor September, dining revenue and retail sales escalated by 3.1% and 3.3%, respectively, indicating that for the first time in 2023, retail growth outpaced dining revenue.

This shift may be attributed to the high establishing baseline from the previous year, which has resulted in declining service consumption

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Even so, the resilience of dining services remains evident, with a two-year average growth rate of 8.3% in SeptemberFurthermore, the trend of consumers opting for more affordable dining options persists, reflecting adjusted spending behaviors.

Despite robust government investments in infrastructure and mild recoveries within the real estate sector, improvements remain subdued compared to previous yearsThe impending fluctuations in U.S.—China tariff policies, especially amid the backdrop of the upcoming U.Spresidential elections, may impose additional pressure on economic expectationsThere is an emphasized need to bolster domestic demand in light of anticipated declines in external demands.

Historically, it has been observed that within 1 to 3 months of interest rate cuts by the Federal Reserve, cyclical consumption sectors tend to display above-average performance, causing particular balances within the consumer economy to shift in favor of growth.

Looking forward to 2025, global economic growth predictions by organizations such as the International Monetary Fund and the World Bank are set at an average of 2.9%. Within this, the United States is expected at only 1.8%, marking a substantial 0.8% reduction from the previous year

Conversely, Japan and the European Union project slight improvements, while China’s growth forecast remains optimistic at 4.4%. In such a macroeconomic context, the outlook for Chinese growth remains impressive.

As the world's second-largest economy, China continues to show resilience in its growth trajectory, buoyed by proactive government policies aimed at job creation and income stabilizationThese measures have proved effective in stirring both online and offline goods salesAlthough narratives around a 'consumption downgrade' persist, there remains a growing confidence in the gradual recovery of the Chinese economic landscape.

Moreover, the third quarter illustrates an increasing number of optimistic signs within consumer goods consumptionRetail figures for food, a sector directly impacted by the dining industry's health, maintained robust growth, showing a 13.7% growth rate in July — fueled presumably by increased summer gatherings

Consumer upgrades represent another positive trend, notably with rapid growth in technological and sustainable products, where retail sales for communication devices and sports equipment surged by 17.4% and 11.4%, respectively.

Notably, consumer preferences have swung towards increased necessity and practicalityAs durable goods expectations rise, the psychological aspect of luxury goods has shifted towards preservation and diversityChina's core Consumer Price Index (CPI) has showcased a cumulative year-on-year growth of just 0.3% between January and September, signifying a gradual upswing in the latter half of the yearA cautious yet resilient consumer base encapsulates China's current economic narrative.

Identifying emerging trends for consumer behavior in 2025, four primary keywords emerge, helping to encapsulate the evolving landscapeThe first keyword is “Value”. This reflects the dual aspects of emotional and functional value as young consumers, particularly Generation Z, are driving the market

Unlike previous generations, today’s youth seem less motivated by mere product ownership, focusing instead on experiences that express their worth.

The second keyword is “Going Global”. Increasingly, businesses are looking beyond borders — enterprises that previously only exported goods are now considering relocating parts of their operations overseasThis necessity, driven by tariff pressures from the U.Sadministration, prompts businesses to build robust supply chains that extend into foreign markets while maintaining operational integrity.

The third keyword highlights the “Lower-Tier Cities”. Many higher-tier urban markets have encountered saturation, prompting many brands to explore growth opportunities in lesser-developed urban areas.

Finally, the fourth keyword emphasizes “Corporate Fundamentals”. In fluctuating economic climates, the strength of internal capabilities becomes paramount

The adage “when the tide goes out, we see who's swimming naked” serves as a constant reminder of how important proper management and company culture are to weather external pressures.

Examining various industries reveals an array of changesThe luxury and fashion sector is currently navigating the challenges of a consumer base feeling the impacts of economic pressuresLuxury brands are pivoting towards diversification as they expand their marketsDigital transformation is another focus area, with brands leveraging technology to create unique consumer experiences.

In the apparel and footwear category, an increased emphasis on social responsibility is gaining tractionConsumers are increasingly gravitating towards brands that prioritize sustainabilityThe growth observed in outdoor apparel, a direct result of changes in lifestyle post-pandemic, mirrors a shifting preference towards functional and fashionable choices.

The health and beauty sector is also witnessing significant innovation

With an eye on sustainability, consumer interest in health-oriented beauty products continues to surgeThe Chinese beauty market, now growing robustly post-lockdown, is on course to achieve substantial growth, bolstered by a heightening demand for eco-friendly products.

In the food and beverage sector, a burgeoning focus on health propels consumers towards functional drinks and innovative productsAs digital advances shape consumer habits, the integration of online and offline strategies is projected to amplify market reach significantly.

As restaurant businesses adapt to the evolving demands for multifaceted dining experiences, new business models emergeThe expansion of satellite stores symbolizes a strategic pivot towards maximizing market penetration with lower investment risks while emphasizing personalization and convenience.

Entering 2024, the clarion call for businesses remains the drive for adaptability