4 Questions Global CEOs Are Asking About China

4 Questions Global CEOs Are Asking About ChinaDecember 18, 2025 | Article Daniel ZipserFor global companies, success in China now depends less on broad market exposure and more on precision: choosing the right segments, channels, cities, and value propositions. The market remains challenging, but for those willing to engage with its complexity, it continues to offer scale, dynamism, and opportunity.China remains the single largest driver of global growth, underpinned by a growing middle class and resilient consumer demand — raising important questions for global CEOs about where and how to win in its next phase. Over the past year, China has remained at the center of global executive attention. Despite persistent questions about growth, consumer confidence, and investment, the flow of senior leaders visiting China has only increased. Many are coming not just to assess risks, but to form a firsthand view of how their domestic competition, the Chinese consumer, and the country’s dynamic digital ecosystem are evolving. Interest in China runs strong well beyond the boardroom: this year registered a record number of international visitors. This edition of China Brief provides a brief recap of China’s macroeconomic performance, and then explores the four questions I hear most frequently from global CEOs and senior executives. While China’s economy is no longer growing at the pace of the “good old days” and competition continues to intensify, the scale, complexity, and dynamism of the market continue to create significant opportunity for those who understand where growth is really happening. Continuing economic momentum China remains the single largest contributor to global economic growth, accounting for roughly one-third of incremental global GDP growth. Growth of around 5 percent this year may fall short of historic expectations, but it remains a remarkable achievement given the size of the economy and global conditions. This momentum has been supported by double-digit export growth and steady expansion in private consumption. (Exhibit 1) At the same time, important structural challenges remain. The property and construction sector continues to operate at a very low base, with no clear line of sight to recovery. Consumer sentiment overall remains near historic lows. Looking beneath the headline sentiment number reveals a more nuanced picture: willingness to consume has gradually improved, while concerns about employment—particularly youth unemployment—have risen. Youth unemployment increased meaningfully through November compared with the end of last year. (Exhibit 2) As I shared in the previous China Brief, published in August 2025 , consumption has maintained positive momentum, supported by robust demand and the emergence of new consumption patterns. Full-year retail sales growth is expected to land at around 4 percent, driven in part by outsized growth in home appliances and electric vehicles during the first half of the year that are fueled by government subsidies and technology upgrades. With subsidies having ended, growth in appliances has declined in recent months, with sales dropping by around 15 percent in October and 20 percent in November. At the same time, other categories—including cosmetics and apparel—have shown modest acceleration in the second half with high single-digit growth in recent months. Food and beverage remains a bright spot, which we discuss further below. Services continue to outperform products. Domestic and international tourism have both posted double-digit growth, underscoring a structural shift from product consumption toward services and experiences. Inbound tourism has reached record levels, and China is seeing an unprecedented number of visits by global CEOs and senior executives seeking to understand a market that remains attractive due to its scale. (Exhibit 3) Four Questions Global CEOs Are Asking About China In a market defined by scale, uneven growth, and rapid change, global CEOs are seeking clarity on where China is headed and how to respond. Four questions come up most often in these discussions. Question 1: If overall retail sales are growing 4-5 percent, why is my business in China declining? The defining feature of China’s consumption landscape today is divergence. While aggregate consumption is growing at 4-5 percent, this headline number masks extremely wide variation across consumer segments, product categories, channels, and city tiers. Breaking the headline growth rate into its underlying parts shows just how uneven consumption has become. Some segments are growing at high single-digit or double-digit rates, while others are flat or in meaningful decline. This explains why some executives experience growth well above the average, while others see stagnation or contraction—even within the same sector. Differences are visible across regions, with lower-tier cities continuing to grow faster than higher-tier cities. Consumption in Shanghai declined in 2024, for example. They are also pronounced across categories. Subsidy-supported categories such as appliances (14.8 percent) and electric vehicles (27.4 percent) have grown rapidly, while discretionary categories such as beauty (4.8 percent) and clothing and shoes (3.5 percent) have been softer. The food, beverage, liquor, and tobacco category illustrates this divergence clearly. Year-to-date growth of roughly 8 percent has surprised many industry leaders. A closer look reveals sharp differences: food has grown at 10 percent, while packaged beverages have remained essentially flat. Alcohol and tobacco consumption has continued to increase slightly. The most important driver behind food growth has been the rapid rise of retailers’ own branded products. This long-standing global trend has now fully arrived in China. While club channels continue to expand, the snack-store channel has emerged as a major growth engine. This channel now represents approximately USD 20 billion in revenue, with the two largest players each operating more than 10,000 stores each—primarily in lower-tier cities. Most sales in these stores come from the retailer’s own branded products sourced directly from factories. China’s highly efficient supply chains allow retailers to offer very low prices while remaining profitable. In parallel, food delivery platforms have continued to accelerate, online channels remain strong, and demand for ready-to-eat, ready-to-cook, and health-focused products has grown steadily. The ongoing shift from wet markets to organized retail has also contributed to reported retail growth. These divergent growth patterns explain why individual brands or categories may decline even as overall consumption remains positive. Success increasingly depends on identifying emerging segments, channels, and consumption occasions—and moving early. Question 2: What does China’s declining and aging population mean for consumption? China’s population has entered a period of decline driven by persistently low birth rates. The country is no longer demographically young, and fertility rates have been falling for more than a decade, with no clear sign of reversal despite policy intervention. In cities such as Shanghai, fertility rates have fallen to exceptionally low levels. Over the next ten years, however, demographic dynamics remain more favorable than often assumed. China's elevated youth unemployment of 17 percent this year reflects the continued entry of large birth cohorts into the workforce, alongside a high rate of college attendance (60 percent last year). Urbanization also continues, with significant runway remaining. According to McKinsey Global Institute forecasts, China is expected to add roughly 60 million new urban households over the next decade—more than the total number of households in Germany. Growth will be even more pronounced among upper-middle-income and higher-income households, the segment most likely to drive demand for branded and premium products. This year, China is expected to surpass 200 million upper-middle-income households for the first time. Long-term projections may present a very different picture, but for the next decade, demographic and urbanization trends in China continue to support consumption growth. (Exhibit 4) Question 3: What does the steep decline in foreign direct investment mean for China? Foreign direct investment (FDI) has declined sharply from its 2022 peak. After a modest drop in 2023, FDI fell by roughly 30 percent in 2024 and declined further in 2025, returning to levels last seen a decade ago. This reflects increased caution and uncertainty among multinational companies. FDI is an important indicator of foreign sentiment toward China and perceptions of investment attractiveness. On that dimension, the recent trend is clearly negative. FDI, however, is a less reliable indicator of actual investment activity within China. Enterprises with investment from Hong Kong, Macao, and Taiwan account for only about 2 percent of China’s total fixed-asset investment, with foreign-invested enterprises contributing an additional 1-2 percent. Consequently, fluctuations in FDI have a relatively limited direct effect on overall investment levels. More concerning is the continued decline in private domestic investment. While much of this can be explained by the collapse of the construction sector, restoring confidence among Chinese entrepreneurs remains critical for sustaining long-term growth. (Exhibit 5) Question 4: Public capital markets are recovering—where does private equity stand? Public capital markets have shown a clear revival. Hong Kong IPO activity has rebounded strongly, driven by a backlog from prior years and improving market conditions, with momentum carrying into the third quarter. Private equity activity, however, remains well below prior peaks. Investment volumes this year are even lower than last year, despite the announcement of a number of large transactions. The share of buyout activity appears to be increasing, but overall PE levels remain subdued. Alongside FDI and domestic private investment, private equity will be a key area to watch as an indicator of confidence in China’s medium-term growth outlook, particularly heading into 2026. (Exhibit 6) Conclusion China’s growth has slowed from historic highs, but the economy—and especially the consumer market—has adapted. Five percent consumption growth on today’s enormous base remains a significant achievement, driven by innovation in products, channels, and business models. The rise of retailers’ own branded products, the emergence of snack-store formats, and the continued expansion of product categories focused on consumer health and fitness illustrate how growth in China continues to shift rather than disappear. For global companies, success in China now depends less on broad market exposure and more on precision: choosing the right segments, channels, cities, and value propositions. The market remains challenging, but for those willing to engage with its complexity, it continues to offer scale, dynamism, and opportunity.Daniel Zipser is a Senior Partner in the Shenzhen office and Leader of McKinsey’s Asia Consumer & Retail Practice. The author wishes to thank Cherry Chen, Rommel Li, Ray Liu, Ivo Naumann, Erik Rong, Jeongmin Seong, and Jia Zhou for their contributions to this article. This article was edited by Glenn Leibowitz, a senior manager in the Taipei office.Explore a career with usChina remains the single largest driver of global growth, underpinned by a growing middle class and resilient consumer demand — raising important questions for global CEOs about where and how to win in its next phase. Over the past year, China has remained at the center of global executive attention. Despite persistent questions about growth, consumer confidence, and investment, the flow of senior leaders visiting China has only increased. Many are coming not just to assess risks, but to form a firsthand view of how their domestic competition, the Chinese consumer, and the country’s dynamic digital ecosystem are evolving. Interest in China runs strong well beyond the boardroom: this year registered a record number of international visitors. This edition of China Brief provides a brief recap of China’s macroeconomic performance, and then explores the four questions I hear most frequently from global CEOs and senior executives. While China’s economy is no longer growing at the pace of the “good old days” and competition continues to intensify, the scale, complexity, and dynamism of the market continue to create significant opportunity for those who understand where growth is really happening. Continuing economic momentum China remains the single largest contributor to global economic growth, accounting for roughly one-third of incremental global GDP growth. Growth of around 5 percent this year may fall short of historic expectations, but it remains a remarkable achievement given the size of the economy and global conditions. This momentum has been supported by double-digit export growth and steady expansion in private consumption. (Exhibit 1) At the same time, important structural challenges remain. The property and construction sector continues to operate at a very low base, with no clear line of sight to recovery. Consumer sentiment overall remains near historic lows. Looking beneath the headline sentiment number reveals a more nuanced picture: willingness to consume has gradually improved, while concerns about employment—particularly youth unemployment—have risen. Youth unemployment increased meaningfully through November compared with the end of last year. (Exhibit 2) As I shared in the previous China Brief, published in August 2025 , consumption has maintained positive momentum, supported by robust demand and the emergence of new consumption patterns. Full-year retail sales growth is expected to land at around 4 percent, driven in part by outsized growth in home appliances and electric vehicles during the first half of the year that are fueled by government subsidies and technology upgrades. With subsidies having ended, growth in appliances has declined in recent months, with sales dropping by around 15 percent in October and 20 percent in November. At the same time, other categories—including cosmetics and apparel—have shown modest acceleration in the second half with high single-digit growth in recent months. Food and beverage remains a bright spot, which we discuss further below. Services continue to outperform products. Domestic and international tourism have both posted double-digit growth, underscoring a structural shift from product consumption toward services and experiences. Inbound tourism has reached record levels, and China is seeing an unprecedented number of visits by global CEOs and senior executives seeking to understand a market that remains attractive due to its scale. (Exhibit 3) Four Questions Global CEOs Are Asking About China In a market defined by scale, uneven growth, and rapid change, global CEOs are seeking clarity on where China is headed and how to respond. Four questions come up most often in these discussions. Question 1: If overall retail sales are growing 4-5 percent, why is my business in China declining? The defining feature of China’s consumption landscape today is divergence. While aggregate consumption is growing at 4-5 percent, this headline number masks extremely wide variation across consumer segments, product categories, channels, and city tiers. Breaking the headline growth rate into its underlying parts shows just how uneven consumption has become. Some segments are growing at high single-digit or double-digit rates, while others are flat or in meaningful decline. This explains why some executives experience growth well above the average, while others see stagnation or contraction—even within the same sector. Differences are visible across regions, with lower-tier cities continuing to grow faster than higher-tier cities. Consumption in Shanghai declined in 2024, for example. They are also pronounced across categories. Subsidy-supported categories such as appliances (14.8 percent) and electric vehicles (27.4 percent) have grown rapidly, while discretionary categories such as beauty (4.8 percent) and clothing and shoes (3.5 percent) have been softer. The food, beverage, liquor, and tobacco category illustrates this divergence clearly. Year-to-date growth of roughly 8 percent has surprised many industry leaders. A closer look reveals sharp differences: food has grown at 10 percent, while packaged beverages have remained essentially flat. Alcohol and tobacco consumption has continued to increase slightly. The most important driver behind food growth has been the rapid rise of retailers’ own branded products. This long-standing global trend has now fully arrived in China. While club channels continue to expand, the snack-store channel has emerged as a major growth engine. This channel now represents approximately USD 20 billion in revenue, with the two largest players each operating more than 10,000 stores each—primarily in lower-tier cities. Most sales in these stores come from the retailer’s own branded products sourced directly from factories. China’s highly efficient supply chains allow retailers to offer very low prices while remaining profitable. In parallel, food delivery platforms have continued to accelerate, online channels remain strong, and demand for ready-to-eat, ready-to-cook, and health-focused products has grown steadily. The ongoing shift from wet markets to organized retail has also contributed to reported retail growth. These divergent growth patterns explain why individual brands or categories may decline even as overall consumption remains positive. Success increasingly depends on identifying emerging segments, channels, and consumption occasions—and moving early. Question 2: What does China’s declining and aging population mean for consumption? China’s population has entered a period of decline driven by persistently low birth rates. The country is no longer demographically young, and fertility rates have been falling for more than a decade, with no clear sign of reversal despite policy intervention. In cities such as Shanghai, fertility rates have fallen to exceptionally low levels. Over the next ten years, however, demographic dynamics remain more favorable than often assumed. China's elevated youth unemployment of 17 percent this year reflects the continued entry of large birth cohorts into the workforce, alongside a high rate of college attendance (60 percent last year). Urbanization also continues, with significant runway remaining. According to McKinsey Global Institute forecasts, China is expected to add roughly 60 million new urban households over the next decade—more than the total number of households in Germany. Growth will be even more pronounced among upper-middle-income and higher-income households, the segment most likely to drive demand for branded and premium products. This year, China is expected to surpass 200 million upper-middle-income households for the first time. Long-term projections may present a very different picture, but for the next decade, demographic and urbanization trends in China continue to support consumption growth. (Exhibit 4) Question 3: What does the steep decline in foreign direct investment mean for China? Foreign direct investment (FDI) has declined sharply from its 2022 peak. After a modest drop in 2023, FDI fell by roughly 30 percent in 2024 and declined further in 2025, returning to levels last seen a decade ago. This reflects increased caution and uncertainty among multinational companies. FDI is an important indicator of foreign sentiment toward China and perceptions of investment attractiveness. On that dimension, the recent trend is clearly negative. FDI, however, is a less reliable indicator of actual investment activity within China. Enterprises with investment from Hong Kong, Macao, and Taiwan account for only about 2 percent of China’s total fixed-asset investment, with foreign-invested enterprises contributing an additional 1-2 percent. Consequently, fluctuations in FDI have a relatively limited direct effect on overall investment levels. More concerning is the continued decline in private domestic investment. While much of this can be explained by the collapse of the construction sector, restoring confidence among Chinese entrepreneurs remains critical for sustaining long-term growth. (Exhibit 5) Question 4: Public capital markets are recovering—where does private equity stand? Public capital markets have shown a clear revival. Hong Kong IPO activity has rebounded strongly, driven by a backlog from prior years and improving market conditions, with momentum carrying into the third quarter. Private equity activity, however, remains well below prior peaks. Investment volumes this year are even lower than last year, despite the announcement of a number of large transactions. The share of buyout activity appears to be increasing, but overall PE levels remain subdued. Alongside FDI and domestic private investment, private equity will be a key area to watch as an indicator of confidence in China’s medium-term growth outlook, particularly heading into 2026. (Exhibit 6) Conclusion China’s growth has slowed from historic highs, but the economy—and especially the consumer market—has adapted. Five percent consumption growth on today’s enormous base remains a significant achievement, driven by innovation in products, channels, and business models. The rise of retailers’ own branded products, the emergence of snack-store formats, and the continued expansion of product categories focused on consumer health and fitness illustrate how growth in China continues to shift rather than disappear. For global companies, success in China now depends less on broad market exposure and more on precision: choosing the right segments, channels, cities, and value propositions. The market remains challenging, but for those willing to engage with its complexity, it continues to offer scale, dynamism, and opportunity.Daniel Zipser is a Senior Partner in the Shenzhen office and Leader of McKinsey’s Asia Consumer & Retail Practice. The author wishes to thank Cherry Chen, Rommel Li, Ray Liu, Ivo Naumann, Erik Rong, Jeongmin Seong, and Jia Zhou for their contributions to this article. This article was edited by Glenn Leibowitz, a senior manager in the Taipei office.Explore a career with us