Summary of Key Points
In the first half of 2026, the Chinese economy faced downward pressure, but the consumer market was not uniformly weak. Instead, there was a clear divergence in spending patterns: large, infrequent purchases such as housing and vehicles showed a decline, while daily necessities (food, clothing, cosmetics) and service-related expenses (travel, entertainment) experienced growth. The logic of consumption upgrading has changed—consumers no longer prioritize expensive or luxury brands; instead, they place more emphasis on health, functionality, experience, and emotional value. These changes are driven by factors such as increased income, the release of budgetary resources due to the cooling real estate market, a cautious yet rational consumer attitude, and new channels that have lowered the barriers to accessing quality products.
Detailed Analysis
1. Decline in Large-Value Purchases, Rise in Daily Consumption
Housing and vehicle purchases, once major components of household spending, have seen a significant slowdown:
- Real Estate: Sales of commercial housing dropped from 18 trillion yuan in 2021 to 8.39 trillion yuan in 2025 (a 53.9% decrease), and further declined by 13.6% in the first half of 2026. Expenses on renovation materials and household appliances also decreased by 8.8%, 7.4%, and 3.7%, respectively. Buying a house requires depleting savings and taking on a mortgage, which means less money is available for other expenses like home renovations and furniture.
- Automobiles: Automobile retail sales fell by 12.6% in the first half of 2026, indicating that consumers are less eager to upgrade their vehicles.
However, daily consumption has shown resilience:
- Prices of grains, oils, and food increased by 7.4%, clothing by 6.7%, and cosmetics by 6.3%. Service-related expenses (travel, entertainment) also rose by 5.3%. In other words, instead of saving for major purchases, consumers are now spending on their daily needs.
2. Shift in Consumption Upgrade
The concept of consumption upgrade has evolved from "the more expensive, the better" to "what really works for me":
- Food and Beverages: High-protein milk and sugar-controlled formulas from brands like Yili are selling well, as is Dongpeng's electrolyte water (which is popular for sports and hot weather). Consumers are more interested in product ingredients and benefits rather than just the brand name.
- Clothing and Cosmetics: Anta's outdoor clothing brands (Disante, Kelong) saw a 59% increase in sales, as skiing and hiking require specialized equipment. Perlaya's scalp care products, which target anti-aging needs, have seen a 102% rise in sales. Consumers are buying products that meet their specific needs rather than pursuing luxury.
In short, when spending money, they focus on whether the product can solve a problem (e.g., hydration, anti-aging) rather than its price tag.
3. Growth in Service and Emotional Consumption
Services and experiences that bring joy are becoming more popular, but consumers are more frugal:
- Travel: The number of travelers increased by 6% in the first quarter of 2026, but total spending only rose by 2.9%, with per-person expenditure decreasing by 2.9%. There is a shift towards shorter trips and urban explorations rather than expensive long-distance travels.
- Entertainment: Concert ticket sales increased by 9.4%, and the audience for large-scale concerts grew by 20%. People are willing to pay for a live experience but are more selective with their spending.
- Emotional Consumption: IP toys from brands like Pop Mart have seen a 134% increase in sales, as they meet consumers' needs for collection, social interaction, and enjoyment. Although individual items are not expensive, the frequency of purchases is higher.
4. Why These Changes During an Economic downturn?
The decline in consumption is not due to a lack of spending but a shift in spending preferences, driven by three main factors:
- Changing Income Levels: Per capita income has nearly doubled from over 20,000 yuan in 2015 to over 40,000 yuan in 2025, reducing the proportion of food expenses in total spending. Consumers now have higher standards for their basic needs.
- Budget Allocation: Money that was previously invested in real estate is being redirected towards daily consumption and leisure activities.
- Rational Consumption: Consumers are less willing to pay extra for brand prestige and prefer products with practical benefits. New channels like live streaming and instant retail have made high-quality products more affordable, allowing ordinary consumers to access them.
Conclusion
With real estate no longer absorbing a large portion of household income, consumer spending is focusing on essential aspects of life—eating healthily, dressing appropriately, and having fun. This represents a more rational form of "consumption upgrade."