Chinese Consumption

Three years of COVID-19 control measures including lockdowns and border closures, the government’s crackdown on speculative investments in China’s real estate sector – which once accounted for roughly 80 percent of the average household’s wealth – and issues like persistent unemployment and an inadequate social safety net have harmed consumer and investor confidence.  China’s post-COVID economic recovery has not materialized: official PRC statistics show that China’s retail sales volume fell by 0.2 percent in 2022 year-over-year, compared to a pre-COVID increase of 8 percent in 2019 year-over-year. In 2023, China’s National Bureau of Statistics reported retail sales of consumer goods increased by 7.2 percent year-over-year, rebounding from pandemic-era lows. However, growth slowed in 2024, with total retail sales rising by 3.5 percent to RMB 48.79 trillion (approximately USD 6.8 trillion). Online retail sales of physical goods remained a bright spot, increasing by 6.5 percent and accounting for 26.8 percent of total retail sales. Despite these near-term challenges, China was the world’s second-largest consumer market at the end of 2024, with a middle-income population—defined as a three-person household with annual income between approximately $14,000 and $70,000 annually—of more than 500 million. The sheer scale of the PRC consumer market makes it highly desirable but extremely competitive, with increasingly desperate sellers in some sectors pricing to sell at a loss in hopes they can outlast competitors competing for shrinking market share.  

Initial price is a critical factor in determining industrial and commercial sales in China. Despite a growing number of corporate and government buyers that carefully evaluate the value of quality and the lifecycle cost of products, Chinese buyers remain highly price sensitive. U.S. firms with premium offerings continue to face pressure to cut prices to remain competitive with lower-quality local offerings, particularly as the Chinese government continues to encourage purchases of domestic products over imports and to promote policies aiming to replace certain foreign products and services in the PRC with local products. 

According to McKinsey & Company, Chinese consumers typically have higher levels of discretionary spending than other emerging markets, specifically in categories such as fashion, accessories, consumer electronics, and electric vehicles. Among higher-income consumers, the study also notes that there is significant demand for luxury goods, premium beauty and personal care products, and high-end cars. Chinese consumers previously attached a premium to foreign brands, but that sentiment has decreased somewhat due in part to overall improvements in Chinese products’ design, features, and performance. However, in the wake of the pandemic, Chinese consumers have remained somewhat cautious, and so-called “revenge spending” has largely been confined to services such as dining and domestic travel.  

Business Culture 

Guanxi   

The concept of guanxi (relations), which refers to having personal trust and a strong relationship in business, continues to be a key factor of successful partnerships. Building guanxi is a long-term process, requiring significant time, persistence, and patience. Having a good general knowledge of China will help establish guanxi. Familiarity with different aspects of its culture will also aid in facilitating initial connections and help build strong foundations for potential business relationships. China’s culture of guanxi places a significant premium on face-to-face connections, and companies that try to do business from afar are typically less successful than those that invest the time into meeting with partners and customers on the ground in China.  

Formal Introductions  

Being introduced to a potential Chinese business partner through an intermediary will encourage business discussions because these contacts generally prefer to do business with people that they have a personal connection with. In other words, the higher level of trustworthiness and credibility that your intermediary has, the higher your chances of establishing successful partnerships.  

Continuous Communication   

A vital part of guanxi is the trust between two parties who conduct business, so consistent communication over time, frequent on-site visits, and transparency are all important to developing successful partnerships.  

Gift Giving  

Gifts are well received by Chinese businesspeople and can significantly reinforce trust and strengthen relationships. Gifts that are unique to the United States and/or have your company logo are usually the most appropriate. However, it is equally important to ensure that any gift given is culturally appropriate (e.g., not giving a clock or watch as a gift, both seen as bad luck) and is neither too expensive nor too cheap, which could potentially embarrass your business partner if they are unable to reciprocate with a similarly-valued gift or result in your contact feeling insulted by the low value of the gift.   

Localization    

Due to linguistic and cultural differences between the United States and China, it is important to consider ways to adapt products and services to the local market. For example, while some of the management workforce in first-tier cities speak English, U.S. exporters should understand the limits of English language proficiency in China. It is not uncommon for high-level executives at state-owned enterprises and private firms not to be proficient in business English. English proficiency also varies significantly based on geography, education, income levels, and age, and it is important to take the language and cultural preferences of potential customers into account when developing a market entry strategy. U.S.-made products in many sectors are generally regarded as reliable and high-quality. But to ensure success, some key elements must be taken into account, including manufacturer-provided localized customer support, on-site training, local service centers, and catalogs and manuals translated into Chinese. 

In many sectors—such as healthcare, automotive, information and communication technology (ICT), and green energy, foreign companies have localized some aspects of their operations (e.g., establishing onshore manufacturing, R&D, or partnerships with Chinese firms), which have in some cases improved eligibility for government incentives, tax benefits, and preferential treatment in procurement decisions.

In addition, adapting product design, customer support, and regulatory compliance processes to align with Chinese standards and user preferences is often essential for sustained competitiveness.

Logistics   

Logistics in China have become increasingly efficient, supported by sustained investments in highway, air, rail, and port infrastructure. According to China’s Ministry of Transport, 73.3 percent of goods still move by truck, though this share is projected to decline as air freight becomes more accessible and in demand.

While COVID-19 caused major supply chain disruptions, China’s freight volumes recovered quickly. By 2021, both road and air freight had surpassed pre-pandemic levels, according to McKinsey & Company. Despite a global freight slowdown from mid-2022 to early 2023, China’s coastal port throughput rose 2 percent and overall freight volume across road, rail, air, and river increased 7 percent year-over-year by July 2023. In 2024, this momentum continued across multiple freight and logistics indicators. 

According to data from China’s Ministry of Transport, total freight traffic reached 5.14 billion tons in December 2024, with highways accounting for 3.77 billion tons, railways 459 million tons, waterways 906 million tons, and civil aviation 850,000 tons—reflecting broad stability and resilience in national logistics flows. Port activity also accelerated: Chinese ports handled 248.5 million twenty-foot equivalent units (TEUs) from January to September 2024, a 7.7 percent year-over-year increase. Shanghai Port alone surpassed 50 million TEUs in annual throughput, maintaining its title as the world’s busiest container port for the 15th consecutive year, according to the Chinese state media outlet China News Service. Meanwhile, fixed-asset investment in the transport sector totaled approximately RMB 3.8 trillion (USD 528.7 billion) in 2024, supporting infrastructure modernization and expansion across highways, ports, and intermodal hubs, according to the Chinese state media outlet Xinhua News.

The pandemic also accelerated demand for express delivery services, driven by the growth of e-commerce and changing consumer expectations. A rising number of companies have adopted “direct line” supply chain models—shipping bulk products via air to Chinese postal partners for express last-mile delivery. This shift has intensified price competition and consolidation among major domestic logistics players, including SF Express, ZTO, YTO, Yunda, Deppon, and STO.

As demand for speed and flexibility grows, air freight is becoming a more viable logistics option—not only for e-commerce shipments, but also for transporting high-value or time-sensitive goods. New aircraft fleets and modernized networks are helping to meet this demand. Global logistics companies such as FedEx, UPS, and DHL, which entered the China market in the 1980s, continue to operate and invest despite regulatory limits on domestic delivery services.

Marketing and Advertising   

China is the world’s second-largest advertising market, dominated by digital platforms, particularly mobile. In 2024, internet advertising revenues reached RMB 891.91 billion (approximately USD 123.5 billion), up 24 percent year-over-year, according to the State Administration for Market Regulation. Digital channels now account for over 86.5 percent of total ad spend, with mobile advertising leading the charge—reflecting both the vitality of China’s consumer market and continued investor confidence.

Advertising activity remains highly concentrated in major urban hubs—Beijing, Shanghai, Hangzhou, Shenzhen, and Guangzhou—which together accounted for 74 percent of total advertising revenues in 2023 (latest available data). The number of major advertising service providers reached 17,000, collectively generating RMB 1.31 trillion in gross revenues, a 17.5 percent increase year-over-year, underscoring the industry’s ongoing growth.

Despite the opportunities, advertising in China is heavily regulated. Both national and provincial authorities closely monitor content, and China’s Advertising Law—amended in 2015, 2018, and 2021—imposes strict guidelines. U.S. companies should pay particular attention to rules against false or misleading advertising, which include:

• Prohibitions on exaggerating product performance, quality, or guarantees
• Penalties ranging from 3–5 times the advertising cost, or fines between USD 30,000–150,000

In March 2023, the State Administration for Market Regulation introduced new measures tightening control over online advertising, including rules on:

• Censorship and advertiser accountability
• Pop-up and open-screen ads
• Livestreamed advertising
• Ads targeting minors
• Recordkeeping and compliance protocols

To navigate this complex environment, many U.S. firms choose to establish a local presence—either through a representative office or by partnering with licensed Chinese firms via joint ventures or contractual agreements. Collaborating with local advertising agencies can help U.S. companies tailor messaging to Chinese consumer preferences while avoiding regulatory missteps, especially when advertising through apps, social media, or health-related products.

Trade Shows & Events  

Participating in trade shows in China remains a valuable way for U.S. companies to introduce products, connect with potential buyers, and expand international sales. While the impact of attending varies by industry, location, and the caliber of the event, trade shows can offer U.S. firms unique opportunities to:

• Showcase products and services to a broad, targeted audience
• Generate qualified trade leads
• Engage with potential buyers, distributors, and partners
• Assess market trends and monitor competitors

That said, participation also comes with risks that should be carefully weighed:

• High costs of attendance and booth setup, with no guaranteed return on investment
• Significant expenses related to booth design, staffing, and promotional materials
• The need to promote effectively while protecting intellectual property, particularly in industries vulnerable to infringement
• Potential for misalignment with the wrong event, especially if insufficient due diligence is conducted on the show’s relevance or quality

To maximize value, companies should thoroughly vet trade show organizers, understand the target audience, and develop a clear promotional strategy. Firms should also take proactive steps to protect their trademarks and proprietary content in advance of exhibiting. See the IP Section below for further information. 

For information on upcoming industry-specific trade shows in China, consult the relevant chapters of this Country Commercial Guide or contact a U.S. Commercial Service Specialist at www.trade.gov/china for tailored support.