“Looking ahead to 2026, we believe that overall consumption growth will still remain at a low level; next year, the biggest factor affecting overall consumption will still be policy changes,” said Peng Yanyan, Head of Consumer Industry Research at UBS Greater China, at a media briefing on December 2.
Peng said that in the first half of this year, the fastest-growing category in the consumer sector was home appliances, mainly benefiting from the “national subsidy” policy for home appliances implemented since Q3 of 2024.
She believes that next year, home appliance subsidies will continue, but the amounts may decrease as the subsidies over the past two years have already released much of the demand for upgrades, and further subsidies will have a diminishing marginal effect on driving home appliance demand, which means that in 2026, the contribution of home appliances to overall consumption growth will significantly decrease.
“We do not have high expectations for consumption next year, but if policies are strengthened, it is still worth looking forward to,” Peng said.
She further suggested that next year, the government is expected to shift the home appliance subsidy policy toward other areas. “Since the second half of this year, we have already seen some signs,” she noted, citing, for example, the Implementation Plan for the Childcare Subsidy System issued on July 28.
Childcare subsidies may be increased next year, or more financial support may be introduced for families with infants and young children, and in addition, subsidies may also be extended to unemployed people, students, migrant workers, and the service consumption sector, she noted.
Looking at consumer sub-sectors, Peng said that although overall consumption has grown at low single-digit rates in recent years, industries such as collectibles, chain tea beverages, high-end jewelry, and pets have maintained strong growth, and in the catering industry, leading chain enterprises have shown upward trends in both same-store growth and store openings, while small individual stores have disappeared rapidly. “We are also optimistic about chain catering enterprises.”
Regarding the impact of this year’s food delivery battle on the catering industry, Peng noted that the impact is mainly seen in the tea beverage sector. In the first three quarters of this year, especially in the first half, leading tea beverage enterprises gained substantial traffic from the delivery battle, and since many subsidies were provided by the platforms, these leading enterprises increased their revenue while also improving profit margins.
At the same time, the delivery battle has intensified industry concentration. Smaller catering and tea beverage businesses have less bargaining power with platforms, bear more subsidy costs, and, coupled with weaker digital operation capabilities, experience revenue growth without profit, or even choose to exit delivery channels, she said.
However, Peng added that since Q3, the marginal impact of the delivery battle on the tea beverage industry has been weakening, and some leading companies have experienced revenue growth without profit, which is mainly because the delivery battle has increased store operating costs as the surge in delivery orders at the same time has raised labor and fulfillment costs for stores.
In terms of tourism, according to UBS’ estimates, tourism consumption accounts for 10% of Chinese residents’ consumption and is the fastest-growing consumer category. From 2025 to 2040, China’s domestic tourism spending is expected grow at an annual rate of 4.8%, exceeding GDP growth, while outbound tourism spending will grow faster at 7.6%, it noted.
By 2040, Chinese travelers are expected to generate a combined market size of $2.45 trillion. Domestic tourism will still account for the majority (75%), but overseas spending may reach $628 billion, becoming the largest contributor to global outbound tourism consumption, accounting for 24%.
UBS expects domestic tourism to encounter short-term price pressures, nevertheless, lower travel costs could spur more trips, with the average frequency of domestic travel per Chinese tourist projected to increase from 4.3 times in 2019 to 7.9 times by 2040. Domestic tourism revenue is forecast to reach $1.822 trillion by then—2.3 times the 2019 level—driven mainly by demographic changes, expanded travel capacity, and longer leisure periods.
For outbound tourism, Chen Xin, Head of China Leisure and Transportation Industry Research at UBS, said that the number of Chinese outbound tourists has basically recovered to the 2019 level, and in popular destinations such as Japan and South Korea, it has already exceeded 2019 levels.
However, in terms of per capita outbound spending, due to consumption downgrading and an increase in outbound travel among low-income groups, it has not yet returned to 2019 levels, and is expected to recover to pre-pandemic levels by 2040, Chen added.