China’s consumer sector, long plagued by a property slump that has slowed the economy and dampened sentiment, could be nearing a “tipping point”, as consumers save less and spend more following last September’s stimulus blitz, analysts said.
Household excess savings grew at a slower pace in 2024 and declined in the third quarter, while social retail sales rose 3 to 4 per cent year on year, according to a UBS report published on Monday. The Swiss bank attributed this reversal to the diminishing “scarring effect” of the Covid-19 pandemic, as well as supportive government policies.
Domestic brands stand to benefit, and private labels could emerge as this year’s growth driver given their low market penetration. But more importantly, they stand to benefit from a potential reversal of the “downtrading” trend seen last year.
“With the improvements in quality and channel convenience, consumers may not necessarily consider domestic brands and/or private labels as ‘inexpensive substitutes’ to foreign-branded products but increasingly opt for domestic brands and/or private labels with a pragmatic mentality,” UBS said.
A separate survey published by the bank in October found that nearly 50 per cent of respondents “converted” to domestic brands and private labels over the previous 12 months, citing “better value for money”. The shift was notably stronger among consumers in first- and second-tier cities.
Investor expectations for a consumption recovery remain subdued because of the potential for higher US tariffs and continuing pressure on property prices. China’s overall real consumption growth is expected to linger at around 3.8 per cent in 2025-2026, according to the Monday report.
