Spending on fast-moving consumer goods in urban China saw minimal growth in 2025, with value increasing by just 0.9 percent despite a 3.6 percent rise in volume, according to the China Shopper Report 2026 by Bain & Company and Worldpanel by Numerator. The modest volume gain was nearly offset by a 2.6 percent decline in average selling prices. Tier 1 cities, including Shanghai and Beijing, experienced flat or slightly negative value growth, while lower-tier cities contributed disproportionately to overall market expansion.

Official statistics align with this trend. Retail sales across China reached 50.12 trillion yuan (approximately US$7.15 trillion) in 2025, representing a 3.7 percent increase year-on-year. Retail sales in rural areas outpaced urban growth, rising 4.1 percent compared to 3.6 percent in urban centers, as reported by the National Bureau of Statistics. Rural per capita disposable income also increased by 5.8 percent, exceeding the 4.3 percent growth seen in urban areas.

Experts suggest the traditional dominance of major metropolitan hubs such as Shanghai, Beijing, Guangzhou, and Shenzhen is diminishing. Wang Wenbo, associate professor of marketing at the Hong Kong University of Science and Technology (HKUST), noted a shift toward a more decentralized growth model. Instead of a single region driving expansion, economic growth is now concentrated in various industrial corridors and manufacturing hubs including cities such as Wuhan, Chengdu, Chongqing, and Xi’an, as well as coastal mid-tier cities like Hefei, Wuxi, Fuzhou, and Jiaxing.

Li Hui, professor of marketing at the University of Hong Kong, emphasized that many tier 3 and smaller cities are contributing disproportionately to volume growth. Households in these areas generally earn less than those on the coast, but enjoy lower living costs, particularly in housing, allowing them to allocate a larger portion of their income toward consumption. Mandy Hu, associate professor at the Chinese University of Hong Kong Business School, highlighted that more affordable property prices encourage greater spending on goods and services aimed at improving lifestyle.

This consumption pattern is reflected in a preference for domestic premium brands over foreign counterparts. Hu cited examples such as Anta, Li Ning, Bosideng in apparel; Proya and Mao Geping in cosmetics; and Xiaomi and BYD in electric vehicles. Food and dining sectors also demonstrate strong local brand loyalty. Li Hui described the emerging consumer preference as “affordable premium” products, with key sectors benefiting including food and beverage, sports, health and wellness, consumer electronics, household products, and experiential services like travel. She noted that offerings that improve quality without a significant price increase, often facilitated by social commerce and on-demand delivery, are particularly successful.

Retailers have adapted to these shifts. Yum China, the operator of KFC and Pizza Hut in mainland China, expanded its presence by adding 1,706 net new stores in 2025, reaching a total of 18,101 outlets across more than 2,500 primarily Chinese cities. The company aims to grow to 20,000 locations in 2026. Yum China’s chief executive Joey Wat highlighted lower store density in cities like Chongqing compared to tier 1 and tier 2 cities, signaling room for expansion. Franchise models, often used to accelerate growth in smaller markets, accounted for 36 percent of new openings in 2025, up from 25 percent in 2024.

Domestic chains have expanded even more rapidly, often operating with thinner margins. Mixue Ice Cream & Tea, which offers low-cost drinks averaging around 2 yuan, now runs about 53,000 outlets — the largest chain by store count globally — predominantly franchised in county-level towns and tier 3 cities. The company raised US$444 million through its 2025 Hong Kong listing.

Despite rapid growth in lower-tier markets, the applicability of business strategies from tier 1 cities remains uncertain. Wang described consumers in lower-tier cities as “leapfrog” buyers who heavily rely on social media and live streaming for product discovery, bypassing traditional department store experiences. Li argued that marketing and pricing strategies must adapt to local preferences, with different pack sizes, price points, and distribution channels tailored to these consumers.

A deeper challenge lies in convincing consumers to increase spending amid a traditionally high savings culture. Wang attributed elevated savings rates in cities like Beijing and Shanghai to high housing and living expenses but suggested that recent property market uncertainties might shift saved funds toward experiences, food, and wellness. Li cautioned that broader concerns about employment stability, healthcare, education, and retirement create ongoing consumer uncertainty. She emphasized that sustained growth in consumption depends on households gaining greater confidence in their future income prospects.