China’s consumption plan and their implications for foreign brands

China has long recognised the need to reduce its reliance on exports and investment, and pivot to domestic consumption as the anchor to becoming a wealthy nation. This priority has become even more urgent with Trump’s re-election, which poses potential risks to exports destined for the world’s largest economy. 

Consumption contributed to just 44.5% of China’s GDP growth last year, down from 82.5% in 2023. Going forward, Beijing wants that percentage to be much higher, supported by its Special Action Plan for Boosting Consumption released on Sunday. The plan outlines a series of measures aimed at stimulating domestic demand and tapping into the $20 trillion of 'rainy day' savings. 

The plan spans eight key areas, from income growth and consumption capacity to improving the consumer environment and optimising regulations. While the plan reinforces China’s commitment to domestic consumption-driven growth, it lacks additional funding beyond what was already announced at the National People’s Congress (NPC) earlier this year.

For foreign brands operating in China, this initiative presents both opportunities and challenges. Understanding its implications can help businesses adapt their strategies to navigate China’s evolving consumer landscape. 

Details of the eight key areas are summarized in our post here, but the headlines are:

1. Promoting Income Growth for Urban and Rural Residents

2. Supporting and Safeguarding Consumption Capacity

3. Enhancing Service Consumption and Public Benefits

4. Upgrading and Renewing Large-Scale Consumption

5. Enhancing Consumption Quality

6. Improving the Consumer Environment

7. Optimising and Removing Restrictive Measures; and 

8. Improving Support Policies such as credit availability. 

Opportunities & Challenges for Foreign Brands

Many of the initiatives will take time to bear fruit, such as universally growing incomes and building consumers' confidence in social safety nets so they'll save less for rainy days. Many of the plan's pillars double down on sectors where domestic companies are already strong and will support local brands. But overall, the plan is positive for foreign brands in China. 

Opportunities:

• Growing incomes and increasing confidence in the welfare system will drive spending, with premium brands standing to gain as consumers prioritise consuming quality goods

• Easier consumer credit will encourage consumers to buy products and services when they may not have before

• Service-oriented sectors (healthcare, education, sports, culture, travel and wellness) may benefit from new incentives and policy relaxations

• Less red tape and bureaucracy for foreign businesses should remove some operational burdens in China.

Challenges:

• Like many things in China, some of plan’s impact will depend on local implementation

• Support for domestic brands will further intensify competition against foreign companies

• Stronger consumer protection laws could increase compliance risks for international brands, especially in pricing transparency and product claims

• Income growth initiatives may take time, meaning consumer spending gains may be gradual rather than immediate.

Final Thoughts: A Market in Transition

China’s Special Action Plan for Boosting Consumption signals the government’s commitment to strengthening domestic demand as a core economic driver. Nevertheless, foreign brands will require adaptability and a clear strategic approach to take full advantage of the changes:

• Alignment with policy trends: Brands should integrate into China’s green economy, wellness sector, and digital innovation landscape where appropriate.

• Differentiation from domestic brands: Foreign companies need to leverage heritage, reinforce their quality, global expertise, innovation, materials/ingredients, with storytelling to stand out.

• Staying agile with regulations: Proactively adapting to consumer protection laws and evolving market access rules will be critical.

As ever, China remains a lucrative but increasingly competitive market. Those that can align with national priorities while maintaining a strong brand identity will be best positioned to thrive as the plan starts to deliver the goods. China Skinny is here to assist.