China's Economic Shift: From Material to Spiritual Consumption

Introduction: The “Recession” We Keep Hearing About

Over the past year or two, whether at social gatherings or industry conferences, conversations about the economy have been overwhelmingly pessimistic:

“The economy is failing.”
“Physical retail is dying—stores are closing everywhere.”
“Manufacturing is brutal—price wars are crushing both owners and workers.”
“Consumption is downgrading—luxury goods aren’t selling, but Pinduoduo is booming.”
“The real estate bubble has burst, and related industries are collapsing.”

These voices are real and heavy. Once-glorious e-commerce towers in Hangzhou now sit largely vacant. Internet celebrity brands are withdrawing from the market. Products are getting cheaper, money is harder to earn, and business is tougher than ever.

So, is China’s economy really failing?

Part 1: The Paradox Between Data and Perception

The Data Shows: Consumption Is Still Growing Steadily

According to China’s National Bureau of Statistics:

2024: Total retail sales of consumer goods grew approximately 2.4% year-over-year
2025 forecast: Expected growth of approximately 2.3%

This is real, tangible growth.

But why don’t people feel it? Why are stores closing, factories laying off workers, and consumption downgrading?

The answer: Our consumption structure is undergoing a profound transformation.

Deeper Data: Regional Disparities Reveal the Truth

McKinsey’s 2025 China Consumer Report reveals an interesting phenomenon:

Regional Income Growth Disparities:

Rural areas: Income levels grew 6.6% year-over-year
Urban areas: Income levels grew 4.5% year-over-year

Rural purchasing power is growing steadily, far exceeding urban areas.

Confidence in Economic Prospects:

Tier-3 and Tier-4 cities: 81-83% hold positive views on economic prospects
Tier-1 and Tier-2 cities: Only 68% hold positive views

This data reveals an important fact: the more advanced the city, the heavier the economic pessimism.

Why These Disparities?

Expert Explanation:

Some experts attribute this to increased government investment in urbanization, with rural areas and lower-tier cities benefiting from policy dividends.

My Observation:

However, I believe the deeper reasons are:

1. Market Sensitivity Differences

Tier-1 and Tier-2 cities are on the economic frontlines. Every major economic shock originates and transmits from here:

Real estate decline hits first-tier cities hardest
Tech layoffs concentrate in Beijing, Shanghai, Guangzhou, Shenzhen, Hangzhou
Consumption downgrade first affects luxury stores in major cities

Tier-3 and Tier-4 cities have lower market sensitivity. Economic shocks transmit more slowly, so the impact feels less severe.

2. Lifestyle and Work Pressure Differences

Dimension	Tier-1 & Tier-2 Cities	Tier-3 & Tier-4 Cities
Housing Price-to-Income Ratio	15-30x	5-10x
Commute Time	1-2 hours	20-40 minutes
Work Intensity	996, 007 common	Relatively regular
Cost of Living	عالي	Relatively low
Social Competition	Intense	Relatively moderate

Lower-tier cities have less life and work pressure, leading to more balanced mindsets.

3. Real Estate Impact Differences

Tier-1 & Tier-2 cities: Housing prices falling from peaks, severe asset depreciation, significant wealth erosion
Tier-3 & Tier-4 cities: Housing prices already modest, limited decline, relatively minor asset depreciation

Therefore, residents in lower-tier cities maintain stronger confidence in economic prospects and more positive mental states.

This data tells us:

The “economic recession” isn’t universal—it’s structural. Different regions and demographics experience vastly different realities.

Part 2: The Shift in Consumption Structure—From Material to Experiential

The Past: The Era of Material Consumption

Over the past several decades, China’s rapid economic growth was driven primarily by an explosion in material consumption:

Buying appliances: TVs, refrigerators, washing machines
Buying homes: from no home to homeownership, from small to large
Buying clothes: from staying warm to dressing well
Buying cars: from bicycles to motorcycles to automobiles

The rise of e-commerce simply allowed us to buy these material goods at lower prices.

The Present: Material Consumption Saturation

But material consumption inevitably reaches saturation:

A TV lasts 5-10 years
A refrigerator lasts 10-15 years
Closets are already full of clothes
People already own homes and cars

Once basic material needs are met, people are no longer willing to spend heavily on these “durable goods.”

This explains why:

Appliance sales are declining
Clothing stores are closing en masse
Real estate is entering an adjustment period
E-commerce growth is slowing

The Future: The Rise of Experiential Consumption

Where did the money go? It’s flowing toward experiential consumption:

Consumption Type	Specific Examples	Growth Trend
Education	Training courses, online learning, knowledge subscriptions	📈 Sustained growth
Tourism	Domestic travel, weekend trips, experiential tourism	📈 Rapid growth
Entertainment	Movies, concerts, escape rooms, murder mystery games	📈 Explosive growth
Health	Fitness, yoga, mental health counseling	📈 Steady growth
Social	Cafés, tea houses, gatherings	📈 Sustained growth

Supporting data:

According to the Ministry of Culture and Tourism, during the 2024 National Day holiday, domestic tourism trips increased approximately 12% year-over-year
However, per capita spending was only around 110 yuan

What does this tell us?

People want to travel, but they don’t want to spend much money. They value experiences over consumption.

Part 3: “Special Forces Tourism”—A Microcosm of New Consumption Patterns

An Interesting Phenomenon:

Some tourist destinations have witnessed scenes like this:

Tourists drive to the scenic area entrance
Park their car, walk around the free zones
Buy a 1-2 yuan bottle of water
Take a few photos and leave

Even more extreme:

Bringing free tents to sleep overnight at service areas
Bringing their own food, spending nothing at the destination
Visiting only to “check in,” not to consume

Hotels never imagined they’d one day lose to tents, not to competitors.

What’s Behind This?

1. High work pressure and uncertain futures

Not knowing when they might lose their job
Not knowing when their salary might be cut
Not knowing when the economy will improve

People are tightening their wallets, saving money to hedge against future risks.

2. Weakening confidence in the future

Prolonged stress makes people more willing to spend money on things that make them happy rather than on material accumulation.

Tourism has become the preferred stress-relief tool:

Doesn’t require much money

•Provides temporary escape from pressure

•Delivers spiritual satisfaction

This is the essence of “Special Forces Tourism”: spending the least money to gain the maximum spiritual fulfillment.

Part 4: Manufacturing’s Dilemma—Price Wars and Survival Pressure

What We’re Seeing:

Factory orders declining, price wars intensifying
Owners operating on razor-thin margins or even losses
Employees being laid off or taking pay cuts
Some owners “running away”

The Underlying Causes:

1. Material consumption saturation, declining demand

Demand for appliances, clothing, and daily necessities is no longer as robust as before, naturally reducing factory orders.

2. Overcapacity, fierce competition

The massive production capacity built over decades now faces insufficient demand. Oversupply leads to price wars.

3. Consumption downgrade, price sensitivity

Consumers no longer pursue “brands” and “premium” products—they pursue “value for money.” This further compresses manufacturing profit margins.

But this doesn’t mean manufacturing has no opportunities.

The key question: Can we capture new demand?

Part 5: Opportunities in Transformation—Who Can Capture New Demand?

Opportunity 1: Products Related to Experiential Consumption

Travel product packaging:

Small packaging for portable foods
Travel-sized daily necessities
Outdoor equipment packaging

Leisure food packaging:

Innovative packaging for snacks and beverages
Small portions, diverse packaging
Eco-friendly, recyclable packaging

Opportunity 2: Value-for-Money Products

Consumption downgrade doesn’t mean no consumption—it means more rational consumption.

Quality products at reasonable prices still have a market
Automation equipment can reduce costs and improve value
Solutions that help clients reduce costs and increase efficiency

Opportunity 3: Customization and Differentiation

How to stand out in price wars:

Not cheaper, but more unique
Not more, but more precise
Not bigger, but more segmented

أمثلة:

Packaging designed for specific scenarios (camping, hiking, road trips)
Products designed for specific demographics (elderly, children, pets)
Solutions designed for specific needs (eco-friendly, portable, smart)

Part 6: Reflections as a Manufacturing Professional

My Observations:

As someone who has worked in the packaging equipment industry for 20 years, I deeply feel the impact of this economic structural transformation.

Our clients—food factories, daily chemical plants, pharmaceutical companies—their changes:

Past	Present
Stable orders, large volumes	Fluctuating orders, small batches, multiple runs
Pursuing brands and premium	Pursuing value and efficiency
Ample budgets	Tight budgets, price-sensitive
Standardized products	Increasing demand for customization and differentiation

But I also see opportunities:

1. Consumption downgrade means increased demand for value-for-money products

Clients need more efficient, cost-saving equipment to reduce production costs.

2. Growth in experiential consumption means increased demand for leisure food and travel product packaging

Demand for small packaging, portable packaging, and innovative packaging is rising.

3. Corporate cost reduction and efficiency improvement means increased demand for automation equipment

Rising labor costs drive companies to adopt automation for efficiency.

Part 7: Conclusion—Pessimism or Optimism?

In this delicate transformation, do we choose to view it pessimistically, or do we optimistically seize the business opportunities in this transition?

One era has ended. A new era has begun.

The business opportunities in this new era test our capabilities even more:

How do we segment markets?
How do we identify new demand?
How do we provide differentiated value?

This is a century-old challenge, but also a century-old opportunity.

My answer:

1. Don’t be blindly pessimistic

Data shows consumption is still growing—only the structure is changing. Understanding trends matters more than complaining.

2. Don’t be blindly optimistic

The transition period is full of uncertainty. Make cautious decisions and avoid blind expansion.

3. Embrace change and seek opportunities

Material consumption has saturated; experiential consumption is rising. Those who capture new demand will succeed in the transformation.

4. Improve yourself and enhance competitiveness

In uncertain times, one thing is certain: capable people always find opportunities.

Final Thoughts: An Invitation from a Manufacturing Professional

If you’re also thinking about:

How to find new growth points in this economic transformation?
How to adjust products and services to adapt to new consumption demand?
How to find differentiated competitive advantages in price wars?

I welcome your conversation.

I’ve worked in the معدات التعبئة والتغليف industry for 20 years, serving clients across food, daily chemicals, pharmaceuticals, and more. I’ve experienced multiple economic cycles. I’m willing to share my observations and thoughts, and I look forward to hearing your insights.

Contact:

•📧 بريد إلكتروني: info@fill-package.com

•📱 WhatsApp: +86-13536680274

•🌐 موقع إلكتروني: www.fill-package.com

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China’s Economic Transformation: Crisis or Opportunity?