China’s consumer recovery remains narrow, while premium and services consumption are relatively resilient

Overview

This report is Bernstein’s quarterly tracking of China consumption in 2Q26, covering macro consumption indicators as well as apparel, sportswear, alcoholic beverages, beauty, tourism, hotels, luxury goods, autos, and the China operations of Japanese consumer brands. The core judgment is that China consumption remains in a low-growth state, with household deleveraging, property pressure, and weaker credit constraining the recovery in mass-market consumption; however, premium consumption, services consumption, tourism-related spending, and some share-gaining brands are still performing relatively well.

Core views

The report’s core views include: first, the recovery in domestic demand remains narrow, and the relative resilience in external demand and industrial production has not meaningfully filtered through to household consumption; second, higher-income consumers and premium categories continue to outperform mass-market consumption, creating a K-shaped divergence; third, beverages, luxury hotels, selected sportswear, and leading beauty names have relative defensiveness or share-gain opportunities; fourth, autos and big-ticket goods remain a drag, with subsidy roll-offs, higher purchase tax, and a high base suppressing demand; fifth, consumption risks in 2H26 remain skewed to the downside, with no clear catalyst from property or credit.

Analysis framework

The report combines macro indicators, industry high-frequency data, channel sales data, company coverage ratings, and valuation tables. It first assesses total China consumer demand, then breaks this down into sectors such as beverages, hotels, sportswear, luxury goods, beauty, autos, and Japanese consumer brands, and finally maps these to relevant listed companies and investment implications.

Methodology notes

• macro-to-industry mappingChina consumption tracking framework

  Use GDP, retail sales, CPI, PMI, credit, property, income, and consumption spending to assess the consumer backdrop, then observe divergence at the industry and company levels.

  This framework emphasizes the coexistence of weak aggregate consumption and structural resilience, avoiding the inference of all consumer subsectors purely from aggregate retail sales.

• consumer stratificationK-shaped consumption divergence

  Higher-income consumer groups and premium categories perform better than mass-market consumption and big-ticket goods.

  The report uses the performance of premium liquor, luxury hotels, jewelry, selected premium beauty products, and sports brands to show that premium consumption still has resilience.

• industry comparisonDual-dimensional analysis of category and channel

  Compare category demand, online and offline channels, brand share, and company valuations at the same time.

  For example, in sportswear, online sales are clearly stronger than offline, and brands such as Adidas, Anta, and Amer show divergence versus Nike and Lululemon.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• premium beverages and beer

  Directly benefits from resilience in premium consumption and price recovery.

  Strengths

  Moutai Feitian wholesale prices have rebounded, with notable gains in premium liquors; beer sell-out has improved, and momentum in the dining channel has strengthened.

  Weaknesses

  Mass-market consumption remains weak, and the industry recovery may be uneven.

  Comparison

  Moutai is listed as the top China beverage pick, followed by Nongfu Spring; Wuliangye has a weaker rating.

  Risks

  Further macro consumption weakness, or channel inventory or pricing pulling back.

• apparel and sportswear

  Driven by online consumption and shifts in brand share.

  Strengths

  3P online sales rose about 10%, Adidas grew strongly, and some brands such as Anta and Amer maintained share gains.

  Weaknesses

  Offline trends remain moderate, Nike is still affected by sell-in cuts, and Lululemon is disturbed by the PFAS controversy.

  Comparison

  Adidas and some emerging brands are growing faster than Nike and mass-market retail.

  Risks

  Weak consumer confidence, inventory adjustments, and brand-related events.

• hotels and leisure

  Supported by resilience in domestic tourism and services consumption.

  Strengths

  China hotel RevPAR continues to recover, with strong performance at both the luxury and economy ends, while slower supply growth supports pricing and occupancy.

  Weaknesses

  The mid-scale segment remains under pressure, and China’s revenue share has declined for some global hotel companies.

  Comparison

  IHG has relatively high China exposure within asset-light hotel coverage, but China’s revenue share has already fallen from its peak.

  Risks

  Another macro slowdown, softer tourism demand, and supply growth dragging on net room growth.

• global luxury goods

  Affected by higher-income Chinese consumers, tourism purchases, and category divergence.

  Strengths

  Demand is stabilizing but has not fully reaccelerated, with jewelry, high-end bespoke, and scarcity products performing better.

  Weaknesses

  Mass luxury and entry-level demand remain selectively weak, while consumers are more focused on value for money and cross-region arbitrage.

  Comparison

  The report favors high-quality names such as Richemont and also watches self-help improvement at LVMH, Burberry, and Ferragamo.

  Risks

  China demand disappointing, exchange rates and price-gap arbitrage shifting purchase locations, and brand execution risk.

• beauty and personal care

  Affected by the overall e-commerce market, the 618 promotion period, and concentration of share among leading brands.

  Strengths

  2Q26 beauty e-commerce GMV was about +13%, and tracked companies overall outperformed the June market and continued to gain share.

  Weaknesses

  Monthly volatility is high, with YoY declines in both April and June, showing the demand environment is not stable.

  Comparison

  Among European food and HPC companies, the report lists L’Oréal, Beiersdorf, Unilever, and others with China premium consumption exposure.

  Risks

  Reliance on promotions, price competition, and weak consumer confidence.

• China autos and electric vehicles

  Autos are a drag on consumption, but EV penetration and exports still offer structural opportunities.

  Strengths

  EV penetration rose to about 59.9%, and EV exports are expected to continue strong growth; BYD, Xiaomi, and Geely are rated Outperform.

  Weaknesses

  2Q26 passenger vehicle sales fell about 20% YoY, with both premium cars and the mass market weak, and traditional luxury brands seeing notable sales declines.

  Comparison

  BYD still leads in sales despite a YoY decline, with Geely close behind; Audi, BMW, Mercedes, and Porsche saw larger declines.

  Risks

  Subsidy roll-offs, higher EV purchase tax, price wars, rising material costs, and intensifying domestic competition.

Key data

• 2Q26 GDP growthabout 4.3% YoYSlower than 5.0% in 1Q26; some charts in the report also mention about 4.5% YoY.
• 2Q26 retail sales growthabout +0.2% YoYShows household goods consumption remained close to stagnation.
• 2Q26 export growthabout +20% YoYExternal demand was stronger than domestic demand, mainly supported by demand for AI- and data-center-related products.
• 2Q26 fixed asset investmentabout -11%Investment weakened again, with property still the main drag.
• Household debtabout -CNY1.1trn, -1.3% YoYHouseholds continued deleveraging, weighing on consumption willingness.
• Moutai Feitian wholesale priceabout +13% from the troughOther premium liquors were up about 17% to 30%, showing relatively stable demand for premium beverages.
• Sportswear 3P online salesabout +10% in 2Q26Higher than overall online retail at about +2%.
• Adidas China salesabout +32%Brand and product momentum drove share gains.
• 2Q26 passenger vehicle salesabout -20% YoYSubsidy roll-offs and a high base made autos a drag on consumption.
• 2Q26 EV penetration rateabout 59.9%Higher than 51.4% in 2Q25 and 42.9% in 1Q26.

Impact & implications

In investment terms, the report suggests China consumption should not be interpreted as a broad-based recovery, and that attention should instead focus on structural divergence: premium, services, tourism, share-gaining brands, and export-related auto supply chains are relatively more attractive; mass-market consumption, big-ticket goods, traditional ICE vehicles, and categories reliant on the property wealth effect remain under pressure. For global consumer companies, the marginal benefit from improving China demand varies: hotel companies such as IHG benefit from RevPAR recovery, but China’s revenue contribution has already declined; luxury companies depend more on higher-income consumers and strong categories such as jewelry.

Risks

• China household consumption remains weak in 2H26, and retail sales fail to improve.
• Households continue deleveraging, and credit demand weakens.
• Property prices and transaction volumes continue to decline, with the wealth effect dragging on consumer confidence.
• Subsidy roll-offs in autos and higher EV purchase tax further suppress big-ticket consumption.
• The resilience of premium consumption is concentrated in a few categories and high-income groups and cannot spread to the mass market.
• Brand inventory, channel pricing, or promotional intensity deteriorates.
• Overseas luxury and tourism consumption is affected by exchange rates, price differentials, and changes in cross-border shopping behavior.

What to watch

• Whether retail sales, services consumption, and dining data improve in 2H26.
• Whether Moutai Feitian wholesale prices and other premium liquor channel prices can hold.
• Changes in online GMV, offline traffic, and brand share for sportswear, including Nike, Adidas, Anta, and Lululemon.
• Whether China hotel RevPAR and slower supply growth continue.
• 1H26E earnings updates from luxury companies, especially trends in jewelry, high-end consumers, and China.
• Beauty e-commerce GMV, demand continuity after 618, and share trends of leading brands.
• Passenger vehicles, EV penetration, export volumes, price wars, and the impact of purchase tax.
• Whether household credit, property sales, and home prices continue to weigh on consumer confidence.