In the Chinese extensive network of smaller towns-categorized as “lower” or “markets with lower and” third and fourth “-Resistance based on the idea show surprising resistance. From personal care and budget cosmetics to home travel and local electronic trade, daily consumption seems to keep much better than suggesting national subtitles.
This divergence depends on the fact that the economic future of China is increasingly depending on the expenditure force of its “new middle class” living outside the richest urban cores of the country. While real estate prices in these regions were under pressure – attraction of local government’s income and wealth of households – residents in smaller cities still spend on products and services that improve their quality of life.
Official data offer some evidence. In the first half of 2024, one -off income to one -off units in third and fourth degrees of China increased by almost 5.8%, which exceeds 4.8% growth, which was observed in the first and second levels. Retail sales on these markets also kept better in categories such as food and everyday needs, reflecting consistent demand for available everyday products.
Hu Ling, partner and CEO of Alixpartners, was quoted in the Chinese media when he said, “The Chinese consumption market is gradually moving from the highest cities to a dual engine growth model.”
Consumers in smaller cities often face lower living costs and less financial pressure. This economic stability, paired with increasing lifestyle expectations, has helped to support expenses in categories such as personal care, dining room and home travel – even as a result of wider economic uncertainty.
Domestic brands friendly, such as Perfect Diary, Florasis and Homefacialpro, gain traction among younger consumers looking for quality without premium prices of international labels. Tourism operators have also seen an increase in short -term travel reserves, especially between middle -class families and pensioners who eagerly free time.
“Business is improving,” said Lin Meiyi, a travel agency in the Chinese picturesque province of Yunnan. “The clientele is more financially modest, I would say compared to the pandemic. Many of the cities come from cities.”
Lower levels also support the rise of electronic trading by controlled value. Platforms, such as Pinduodo-Karse, have built their business at mass discounts and models of purchasing groups adapted to consumers sensitive to price-made a remarkable involvement from rural and small towns.
In his latest report on Pinduodo revenues, he quoted stronger than expected growth in categories, such as agricultural products and particulars of the household, most of which outside the city centers. Its strategy of building logistics infrastructure in smaller towns and rural areas has paid off, allowing it to address consumers who are subordinate to traditional retail.
The market responded: US stocks of Pinduodo have increased by more than 40%in the last year, exceeding most of the main Chinese technology peers. Analysts point to their deep reach in regions sensitive to prices as a resistant competitive advantages, as regulated by the habits of national consumption.
It is true that a decline in the Chinese property sector – especially acute in smaller cities – suppresses the overall wealth of households. But the connection between housing and consumption markets can be more nuanant than previously expected.
In lower -level cities, where the property is more accessible and many houses are fully owned, households are generally less used. This gives consumers to spend greater flexibility on objects with smaller tickets, even if they hold the main purchases.
Trust between millennia in lower -level cities is higher than in the highest cities, with 75% of respondents expressing optimism about the national economy, compared to 65% in large cities, according to his McKinsey’s Chinese consumer report from 2024, which attributes this optimism to partially lower live pressures and more stable local labor markets.
The consequences for investors are clear: recovery in China may be slower and uneven than in previous cycles, but it is still happening – not always where the reflector is.
“Consumers and entrepreneurs from smaller cities import ideas from developed regions,” said Kane Hu, Peak Investment, chief analyst, boutique brokerage in the western city of Chengdu, with assets of about 80 clients and approximately 100 million yuan ($ 15 million).
This creates an opportunity for companies with strong regional presence, competitive prices and scalable operations. Domestic brands that can satisfy the demand for available quality during a wide geographical footprint can be better placed than premium brands concentrated in large meters.
For global investors, it is not to leave the story of Chinese consumption – but to take a closer look where growth is really happening. The most prominent consumer activity can take place far from Beijing luxury centers, in small towns with a fewer headlines, but a lot of unused expenditure forces.
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(Tagstotranslate) Chinese middle class
