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17 1月 2025
Insight
The consumer sector in China is undergoing a dynamic transformation, driven by a combination of strong government policy support, shifting consumption habits, green and low carbon consumption preferences, and the adoption of new technologies. As the Chinese economy experiences a slowdown for the first time in decades, the market focus has shifted to new growth areas and strategies that can sustain in the current economic climate. Despite the cautious approach of new investors and the repositioning of multinational companies’ China strategies, the immense potential of the consumer market in China continues to attract investment. This article explores the latest consumer trends, investment and M&A activities, and the legal and regulatory environment which shapes the consumer sector in China to date and in 2025.
Latest consumer trends
Strong Policy Support
The Chinese government continues to play a pivotal role in stimulating consumer spending through a series of policy measures. These policies are designed to boost domestic consumption and ensure sustainable economic growth. For example, on 31 July 2023, the National Development and Reform Commission issued the “Notice on Measures for Restoring and Expanding Consumption”, focusing on revitalizing consumer confidence and spending. On 29 July 2024, the State Council issued the “Opinions on Promoting High-quality Development of Service Consumption”, which aims to enhance the quality and efficiency of service consumption across various sectors. On the annual Central Economic Work Conference meeting in December 2024, a number of key tasks for 2025 were outlined, including urging efforts to vigorously boost consumption, improve investment efficiency, and expand domestic demand on all fronts.
At the local level, we are seeing many local governments issuing consumption vouchers to boost local spending in dining, travel, entertainment and sports sectors.
Green and Low Carbon Consumption
An increased consciousness towards environmental sustainability is driving the trend of green and low carbon consumption. This is demonstrated through the rising demand for organic goods, energy-efficient products and green home supplies. Green home supplies and trade-in programs (以旧换新) are gaining popularity in China, reflecting a broader commitment to sustainability and eco-friendly practices. On 7 March 2024, the State Council issued the “Action Plan for Promoting Large-scale Equipment Renewal and Consumption of Trade-in Programs”, which aims to encourage the replacement of old products with greener, more energy-efficient ones. The Chinese government is also providing subsidies for greener and more energy-efficient products, further promoting this trend.
Online Consumption
Online consumption continues to grow at an impressive rate, with live streaming sales experiencing a significant boom in recent years. Brands are leveraging live streaming platforms to engage with a wider audience and drive sales, capitalizing on the digital transformation of the consumer market. Social media has become an important scene in the online consumption chain. Many consumers obtain product information through online channels such as short videos, chat tools and live streaming rooms. This trend is reshaping the retail landscape, offering consumers a dynamic and interactive shopping experience.
Preference for Localized Products
There is a growing preference for localized products among Chinese consumers, particularly those with traditional Chinese trade names (国货) or that embody traditional Chinese culture (国风). This trend reflects a sense of national pride and cultural identity, with consumers increasingly supporting homegrown brands that resonate with their heritage.
Shift in Consumption Habits
There has been an observable shift in consumption habits among Chinese consumers who are increasingly adopting more pragmatic and rational consumption habits. Consumers are now placing greater emphasis on the price-performance ratio, quality, and necessity of products. Furthermore, there is a notable trend towards self-pleasing consumption, where individuals prioritize personalized services and products that offer emotional value (情绪价值). This trend highlights the increasing desire for personalized experiences that cater to individual preferences.
Embracing New Technologies
Chinese consumers, particularly the younger generations, are keen to embrace new technologies. The concept of new quality productivity (新质生产力) is driving the upgrading of products and services. Items with good connectivity and intelligence are highly sought after in the market. Smart devices and small smart household appliances are also becoming increasingly popular.
GenAI reshaping consumer behaviour and corporate world
With the launch of ChatGPT in 2022, Generative AI (GenAI) has become an unavoidable hot topic. Chinese tech giants have also been launching and constantly updating their own GenAI models ever since. In China, due to certain regulatory requirements and limited access to mainstream Western models, Chinese domestic GenAI models have gained significant popularity especially among younger generations, used widely from their personal life (chatbot as companion, research assistant to help decide where to shop and have fun) to professional life.
In the corporate environment, GenAI is expected to play a pivotal role in streamlining work process, automating routine tasks, improving decision-making processes, and fostering innovation. By leveraging AI-driven insights, companies in the consumer sector can optimize their supply chains, predict market trends, and develop targeted marketing strategies.
Growing Brand Collaborations
Collaborations among brands are becoming more prevalent, with partnerships such as luxury products plus tea beverages, computer games plus coffee or alcohol, and dining plus cartoon, all capturing significant consumer interest. These collaborations create unique and exciting product offerings, enhancing brand appeal and consumer engagement. By relying on the chemistry between brands, these collaborations meet the diverse needs of consumers and tap into their curiosity through cross-segment cooperation.
Investment and M&A
With China’s economy slowing for the first time in decades, the market focus has shifted to new growth areas and strategies that can sustain the current economic climate. While multinationals continue to re-position their China strategies and new investors remain cautious, opportunities persist in this massive market, particularly in the consumer sector. The promising growth potential of the Chinese consumer market is a major reason why multinational companies and retail brands remain committed to investing in China.
Strong governmental policy support and new opportunities in certain sub-segments have led to the revival of suspended M&A projects in 2024, resulting in a recovery of M&A activities in the consumer sector. New joint ventures and strategic partnerships are being formed as parties seek to navigate regulatory complexities, share risks, and optimize value. Overall, investments in the consumer sector have become more rational in recent years, with strategic investments and M&A projects in high-quality assets continuing to prevail.
Looking ahead to 2025, market consolidation opportunities are expected to increase due to more reasonable market valuations and the emergence of opportunities to acquire and consolidate struggling brands. Amid economic uncertainties, multinational brands will continue to restructure and rationalize their investments in China, including divestitures, restructuring, and joint ventures with local partners. They will also explore new investment opportunities in emerging growth areas. Investments in R&D, innovation, ESG, and localization will be particularly essential for foreign brands to win local customers and establish a stronger foothold in China.
In the private equity investment field, capital remains cautious, focusing on sectors such as food and beverage, dining, and healthcare. New segments like pet-related products, green and low carbon consumption, home appliances, and elderly consumption are also attracting capital interest. Investors tend to favour companies at a relatively early stage of financing that are capable of technological innovation and meeting the ever-changing needs of consumers and market potentials. Meanwhile, in the public M&A field, some consumer goods listed companies are participating in the establishment of private equity investment funds to expand their main businesses, consolidate resources, and enhance their industrial chain layout. Regarding IPOs, the Hong Kong capital market continues to be an attractive option for consumer goods companies from China. There are expectations of notable financing amounts in the Hong Kong IPO market in 2025.
We have been seeing Chinese local brands pursuing overseas expansion ambitions, achieving global industrial layouts, and meeting customer needs from other regions in recent years. We expect that this trend will continue in 2025.
Other forms of collaborations are also emerging, such as partnerships between brands and e-commerce platforms, GenAI collaborations, and collaborations between brands in different sub-segments. IP and brand licensing deals are becoming more common as well.
Despite ongoing challenges, we remain cautiously optimistic that M&A activities in China’s consumer markets will pick up in 2025 as consumer and investor confidence improves, driven by continuous strong government policy support.
Legal and Regulatory Environment
In 2024, a significant milestone was achieved with the implementation of the “Regulation on the Implementation of the Law on the Protection of Consumer Rights and Interests” by the Chinese State Council. This is the first administrative regulation supporting the “PRC Consumer Rights Protection Law” since its enactment in 1993. The regulation aligns with laws in related sectors such as product quality, credit systems, antitrust, and e-commerce, addressing major concerns like false advertising, deposits and prepayments, livestreaming promotions, big data discrimination, and excessive collection of consumer information. It underscores the Chinese government’s commitment to improving the consumer environment and imposes higher compliance standards on businesses.
Regulatory enforcement is focusing on precise enforcement (精准执法). While key areas like food and drug safety and product quality are attracting more regulatory attention. we are also seeing clearer and more practical regulatory guidelines across the overall consumer sectors. For example, the State Administration for Market Regulation (SAMR) has issued measures to reduce excessive or unfair punishments and provide transparent compliance guidance. More guidelines are expected in 2025. In the Yangtze River Delta region, there is a trend of reducing or waiving penalties for minor breaches, promoting fairer enforcement.
Additionally, regulatory complexities arising from geopolitical tensions continue to attract attention. In September 2024, China’s Ministry of Commerce investigated a global clothing company under the Unreliable Entity List regime, in response to US sanctions targeting commodities from Xinjiang Province. Such instances highlight the policy uncertainties driven by evolving international dynamics, which will play a crucial role in cross-border trade in the coming years. The ongoing tariff wars, sanctions, and countermeasures between China and the US necessitate that businesses continuously track legal changes and trends.
China’s antitrust regulatory approach is shifting from traditional enforcement to a more systematic, flexible and self-regulated framework. Key developments include:
- Flexible Enforcement and Compliance Incentives: The “Three Letters and One Notice (三书一函)” system (effective from 29 November 2023) allows antitrust authorities to identify potential anti-competitive behaviours early and help companies correct them before penalties are imposed. This reduces the compliance burden on businesses and encourages voluntary self-checks. Companies that self-report and rectify issues before investigations can receive reduced or waived penalties.
- Self-Regulation and Enhanced Compliance Awareness: The “Antitrust Compliance Guidelines for Enterprises” (effective from 25 April 2024) provide clear frameworks for identifying antitrust risks, such as price-fixing and market dominance abuse. These guidelines encourage businesses to enhance internal compliance through risk assessments, training, and audits to ensure alignment with antitrust laws.
- Standardization of Compliance Management: The draft “National Standard for Fair Competition Compliance Management” (published on 13 November 2023) emphasizes continuous improvement processes and risk management through a PDCA (Plan-Do-Check-Act) cycle. This standard helps businesses develop comprehensive compliance systems and offers legal safeguards through certification, potentially resulting in leniency or immunity from penalties.
In summary, these changes reflect a shift from a reactive, punishment-based model to a proactive, prevention-focused approach. Businesses in the consumer sector are encouraged to establish robust compliance systems, self-regulate, and take corrective actions to minimize legal risks.
In 2024, China continued to develop important new regulations related to IP protection. The State Administration for Market Regulation issued the “Antitrust Guidelines for Standard Essential Patents” in November 2024, clarifying the application of “Antitrust Law” in the field of Standard Essential Patents (SEP). These guidelines refine identification rules and considerations, guiding compliance and antitrust supervision in the SEP field. As antitrust legislation related to SEP becomes increasingly mature in China’s telecommunication sector, the Fair, Reasonable, and Non-Discriminatory (FRAND) licensing practices from this sector could serve as a valuable reference if similar issues arise in the consumer sector.
China continues to improve IP protection through court enforcement efforts, with Chinese courts raising compensation for IP infringement cases. For instance, in the liquor sector, the Langjiu vs. Yelanggujiu trademark infringement case resulted in a final award of 195 million RMB (about 27 million USD) in punitive damages. In the automotive sector, the Supreme Court awarded 640 million RMB (about 88 million USD) in the Geely v. WM Motor trade secret infringement case, setting a new high for compensation in IP cases in China.
The Chinese court system is also handling more foreign-related IP disputes. The Beijing IP Court’s “White Paper on the Ten-Year Trial Work (2014-2024)” shows that it has handled over 36,000 foreign-related IP cases, with parties from more than 100 countries and regions. Foreign-related cases accounted for nearly 20%, making China an increasingly preferred place for international IP litigation.
Overall, these positive developments will help strengthen confidence in continuous investment in China’s consumer markets.
Data security and protection of personal information
The protection of personal information, especially consumer data, remains a top priority for regulators, with strengthened enforcement measures focusing on the minimal and necessity principles for data collection.
China’s data legal regime has been enhanced with the “Network Data Security Management Regulations”, effective from 1 January 2025. These regulations supplement the existing “Personal Information Protection Law”, “Cybersecurity Law”, and “Data Security Law”. A comprehensive personal information protection self-audit guidance is expected to be implemented and enforced in 2025.
The cross-border data transfer regime has been eased but remains a key compliance area. Free trade zones in Beijing, Shanghai, and Tianjin have introduced white list/black list mechanisms to further relax cross-border data transfers.
Looking ahead, more industry-focused data regulations and standards are anticipated.
AI
Consumer products companies are increasingly adopting AI to enhance operations, raising issues related to intellectual property, data, competition, and ethics. This requires robust AI governance and compliance frameworks to ensure responsible use.
Effective AI governance involves creating policies and frameworks addressing legal and compliance issues like intellectual property, unfair competition, cybersecurity, and data protection. Companies should also train employees to adhere to these policies.
China is actively developing regulations and standards for AI to ensure its safe and ethical use, including measures for generative AI, deep synthesis, algorithm recommendations, and ethical reviews.
Starting 1 January 2025, the State Council’s new retirement policy will gradually increase the retirement age: men to 63 (from 60), women in managerial roles to 58 (from 55), and women in ordinary roles to 55 (from 50). The policy also extends the minimum pension contribution period from 15 to 20 years. Employees who haven’t met this period by retirement age can continue contributing or make a lump-sum payment. Flexible retirement options will allow early or delayed retirement by up to three years.
Effective 1 July 2024, the latest amendments to the Company Law emphasize democratic management through an Employee Representative Congress. Companies must now consult employees on restructuring, major operational issues, liquidation, and bankruptcy. Companies with at least 300 employees must include employee representatives on their board of directors or supervisors. The new law also defines management duties and increases their liabilities.
From 2025, public holidays in China will increase from 11 to 13 days annually, adding one day each to the Spring Festival and Labour Day. Employers may face higher costs due to increased public holidays, as they must pay regular salaries during these days and 300% of the daily rate if employees work on holidays.
These new changes will impact consumer sector companies by influencing workforce management, operational costs, and compliance requirements.
While there are challenges to navigate, the opportunities in this dynamic market are substantial. Companies that can effectively navigate the regulatory landscape, innovate to stay ahead of the competition, and tap into emerging trends will be well-positioned to succeed in the Chinese consumer market. By focusing on areas with the highest growth potential, leveraging digital technologies, and aligning with consumer values, companies can capitalize on the promising opportunities in this market.
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The contents of this publication are for reference purposes only and may not be current as at the date of accessing this publication. They do not constitute legal advice and should not be relied upon as such. Specific legal advice about your specific circumstances should always be sought separately before taking any action based on this publication.
© Herbert Smith Freehills 2025