China's consumer market: Strong resilience and promising upgrading

Editor's note: Liu Chunsheng is an associate professor at the Beijing-based Central University of Finance and Economics. This article reflects the author's perspective and not those of CGTN.

Recently, overseas commentators have been bearish on China's consumption. They cited slowing retail sales growth and rising household savings, hastily linking the two indicators to conclude that consumers are reluctant to spend and domestic demand is weakening. Such superficial analysis sticks rigidly to traditional metrics focusing only on physical goods. It has failed to recognize China's economic transition and misinterpreted the true picture behind official statistics.

Structural transition rather than domestic demand contraction

Total retail sales of consumer goods mainly cover tangible physical goods and catering revenue, while excluding most fast-growing service sectors such as tourism, accommodation, healthcare, education and cultural performances. Judging overall domestic demand solely by this indicator leads to obvious misjudgments. China's consumption has moved well beyond basic daily necessities. The growth of service spending has long outpaced goods consumption.

Domestic tourism has remained hot this year. Holiday cultural and travel bookings have repeatedly hit new highs, including immersive cultural experiences, rural getaways and long-distance cross-provincial trips. Demand for housekeeping, healthcare, performances and sports events has surged month after month. These experience-based expenditures are not fully reflected in traditional retail data, creating a false impression of sluggish consumption. Meanwhile, online consumption has shifted from physical shopping to digital entertainment, local lifestyle services and pre-booked experiences. Spending on online services far outperforms physical e-commerce, with consumption shifting from buying products to purchasing experiences.

Higher household deposits do not equal suppressed consumption, nor should savings and spending be treated as opposites. The post-pandemic rise in savings mainly shows that households have set aside precautionary funds for education, healthcare and elderly care. It is merely a short-term asset allocation adjustment instead of long-term spending cuts. These accumulated savings will serve as a reservoir for future consumption. Economies in the middle and late stages of urbanization universally see temporary savings growth. As China continues urbanization, families naturally save for unexpected risks and big-ticket outlays, making higher savings entirely reasonable.

Many foreign media outlets have ignored nominal growth distortion caused by price factors. As the world's factory, fierce market competition has kept commodity prices low, dragging down nominal consumption even when purchase volumes rise. Steady increases in per capita consumption of meat, home appliances and automobiles prove that real demand remains solid.

Consumption expenditure has been the primary engine of China's economic growth for years, laying a solid foundation for domestic demand. Short-term growth volatility is normal amid economic recovery. It is purely a biased data selection to frame cyclical fluctuations as a permanent collapse in domestic demand. Pessimism based on one or two months' figures ignores China's massive population and large middle-income group and cannot hold up against macroeconomic facts.

Abundant new drivers of consumption upgrading

Beyond short-term data swings, China's consumption landscape is undergoing profound structural reshaping. Growth is now driven jointly by goods and services, shifting from rigid daily spending to high-quality experiential consumption. Both lower-tier markets and middle-class upgrading fuel new business models and untapped market potential.

Tourism leads consumption recovery. Modern travel includes short vacations, rural trips, study tours and outdoor camping. Leisure travel is no longer a luxury but a regular lifestyle for urban and rural residents, with scenic spots and bed-and-breakfasts fully booked during holidays. Integrated cultural tourism such as museum shows, night tours and live performances has extended industrial chains and boosts catering, accommodation and transportation. Experience-driven travel has created strong multiplier effects, underpinning service consumption growth.

Digital e-commerce has also transformed. Traditional low-cost online shopping has given way to live-stream sales, instant delivery and local lifestyle platforms. Orders for home services, fitness courses and online entertainment are now growing much faster than physical goods. The "online booking, offline experience" model has become mainstream. E-commerce penetration in counties and villages keeps rising with improved logistics, unlocking consumption among hundreds of millions of rural residents. Digital platforms are bridging urban-rural gaps and releasing multi-tiered consumer demand.

Service consumption accounts for an ever-larger share of household spending. Households are spending more on healthcare, childcare, housekeeping, culture and sports. Young consumers pay for hobbies, while seniors prioritize wellness services, and smaller families drive demand for domestic services. At the same time, goods consumption is upgrading: Shoppers cut low-end generic products and spend more on smart home appliances, new energy vehicles, premium cosmetics and gold jewelry. Trade-in policies keep stimulating big-ticket consumption. High-end demand in first-tier cities and basic consumption growth in smaller cities form a multi-layered market with long-term room for expansion. With stable physical goods trade and fast-growing services, China's consumption is breaking away from over-reliance on retail sales and entering a high-quality growth phase.

Targeted policies to unleash long-term domestic demand potential

Consumer confidence and purchasing power hinge on income expectations, social security and product supply. To counter weak short-term sentiment and excessive precautionary savings, China has rolled out policies to raise incomes, strengthen social safety nets and create new consumption scenarios, removing barriers so people can afford, dare and are willing to spend.

Job security and income growth form the bedrock of consumption. Authorities prioritize employment, expand work opportunities for graduates and migrant workers, raise minimum wages and enlarge the middle-income group. Steady income growth guarantees spending power. Meanwhile, policies stabilize the property market and capital markets to protect household wealth and ease fears over asset depreciation. As wealth expectations stabilize, excessive precautionary savings will gradually be converted into actual consumption.

A stronger social safety net reduces household anxiety and unlocks savings for spending. Increased public spending on education, medical care and elderly care expands medical insurance coverage and subsidized community childcare and senior services. When families no longer need to hoard cash for huge rigid bills, they will freely spend more on travel, leisure and premium goods. Rather than forcing short-term spending, improved social security stabilizes long-term expectations and lowers excessive savings.

Supply-side reforms foster new consumption scenarios to match upgraded demand. A unified national market breaks regional barriers, while trade-in incentives sustain sales of vehicles, home appliances and housing renovations. Local governments develop night economies, county-level commerce and community services by lifting unreasonable restrictions. More high-quality tourism, wellness and cultural services resolve supply-demand mismatches where consumers have money but lack desirable products. Short-term subsidies support big-ticket spending, while long-term reforms optimize income distribution and public services. This policy mix is steadily unlocking the potential of China's super-large consumer market.