China’s consumer spending is shifting, and it’s not just about Labubu dolls anymore. While economists and policymakers worldwide urge China to boost its consumer spending—currently less than 50% of GDP compared to two-thirds in the U.S.—the real story lies in where that spending is headed. Spoiler alert: it’s not just about goods. But here’s where it gets controversial: could China’s growing appetite for services, rather than material goods, redefine global business strategies? Let’s dive in.
Since its July opening, Legoland Shanghai Resort, operated by UK-based Merlin Entertainments, has been a magnet for crowds. With eight theme parks and over 75 interactive rides, it’s a prime example of how China’s consumer landscape is evolving. But this isn’t just about theme parks—it’s about a broader shift toward experiences over possessions.
According to John Quelch, a seasoned business scholar and Executive Vice Chancellor at Duke Kunshan University, the key to unlocking China’s consumer market lies in services. “Culture, heritage, media, entertainment, sports events—these service-based experiences, along with travel, are not only encouraged by the government but are resonating deeply with consumers,” Quelch explained in a recent interview from Shanghai. “Western companies have tremendous opportunities here, but they’ll need to navigate China’s content regulations—just like in any other country.”
China’s urban transformation is a game-changer. With 67% of its population now living in cities—up from just 20% in 1980—lifestyles have shifted dramatically. “Most Chinese live in compact apartments, unlike Americans in single-family homes,” Quelch noted. “This limits space for bulky appliances and household goods, naturally steering consumption toward services.”
And this is the part most people miss: China’s retail service sales grew by 6.2% in 2024, outpacing retail goods by three percentage points. As Commerce Minister Wang Wentao pointed out in Qiushi Journal, once a country’s per capita GDP hits around $15,000, consumption tends to shift from goods to services. With China’s per capita GDP surpassing $13,000, this transition is accelerating.
One of the most promising areas? Travel. Quelch, who frequently travels within China, observes that weekend flights are dominated by young people under 30, exploring cities, visiting friends, or attending concerts. “Young Chinese are increasingly spending on emotion-generating experiences rather than material goods,” he said. This shift is a goldmine for service-oriented businesses.
Foreign companies are already capitalizing on this trend. The NBA sold out expensive exhibition games in Macau, while European orchestras, particularly from Germany, are drawing crowds in China. Even museums and galleries are thriving—the Musee d’Orsay’s recent Shanghai exhibition was a massive hit. For younger audiences, attractions like Legoland Shanghai and Shanghai Disney Resort’s new themed hotel are proving irresistible.
But here’s the counterpoint: China’s high savings rates, driven by a lack of robust social safety nets, still limit consumer spending. Plus, there’s a growing debate about whether the Western model of consumption-driven growth is sustainable in a resource-constrained 21st century. “High-quality consumption—that which minimizes the carbon footprint—is the way forward,” Quelch argued. “But trade tensions and geopolitical friction will continue to shape consumer behavior.”
So, what does this mean for the future? As China moves away from infrastructure-led growth, consumption—particularly in services—will play a larger role in its economy. For Western companies, this shift offers a unique opportunity to tap into a market hungry for experiences. But the question remains: Can they adapt to China’s evolving priorities and regulatory landscape?
What do you think? Is China’s focus on service-driven consumption a sustainable model, or does it pose challenges for global businesses? Let’s hear your thoughts in the comments!
