Markets

China

The world's largest middle class and more than 100 cities exceeding two million people

eBook

The China Playbook for SME Leaders

Get the full deep-dive guide to setting up a lasting venture in China. Also available as a podcast series

Interactive Map

The provinces and major cities

Interactive map:
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At a glance

3 essential snap shots

China's market: scale and complexity

The foundation of the Chinese market is economic mass: a €18 trillion economy powered by the world's largest middle class, comprising more than 500 million individuals. However, forget the idea of a single, uniform market:

China is a constellation of over 100 cities, each with a population exceeding two million. Cities such as Chengdu, Hangzhou and Wuhan are distinct markets in their own right, each with their own consumer preferences, competitive landscape and logistical realities. Success in one is no guarantee of success in another.

This gives rise to three realities that you need to understand from the outset.

A tiered ecosystem: China's cities are informally ranked in tiers based on their level of economic development. Tier-1 cities, such as Shanghai and Beijing, are hyper-competitive, trend-setting, high-cost environments. Tier 2 cities, such as Chengdu and Hangzhou, are often growth hotspots with affluent consumers and less saturated competition. Tiers 3 and 4, meanwhile, are vast, price-sensitive markets with entirely different digital behaviours. Your entry strategy must define a sequence across this tiered map. Where you start matters.

Localised preferences. Consumer tastes diverge dramatically. A beauty product that is popular in the humid south may not be popular in the dry north. A marketing campaign that is successful in Beijing may not be successful in Guangzhou. E-commerce platforms that dominate in one region may be insignificant in another. Localising products, marketing and distribution is non-negotiable.

Logistical realities: Last-mile delivery networks differ from city to city. Regional warehousing hubs vary. Business licensing and regulations are not uniform across the country. The physical and administrative infrastructure you rely on in Shanghai will be different in Chengdu. Plan accordingly.

A "paradox" that defies Western frameworks

Take a walk through Shanghai's Lujiazui financial district and you will see a skyline that embodies pure capitalism: private corporations worth hundreds of billions, luxury brands lining every mall and spectacular displays of wealth. Yet ...

Yet the largest of these corporations has a Communist Party committee embedded within its structure, and the government can transform entire industries with a single policy directive. What system created this wealth? It doesn't fit neatly into the "communist" or "capitalist" categories.

Foreign observers often mistake this for incoherence, waiting for China to pick a system. But it already has one:

Pragmatic developmentalism. Use whatever works.

This explains why, in the 1990s, China backed private entrepreneurs when they outperformed state companies. It explains why, in 2021, the government cracked down on tech giants when monopolies began threatening systemic stability.

Ideology provides guidance. Results determine policy.

Generational differences in China are seismic

Generational differences in most markets are gradual. In China they are seismic. A 60-year-old grew up under central planning, rationing and the Cultural Revolution. In contrast, a 30-year-old has only ever experienced growth, smartphones and global connectivity.

They have different fundamental assumptions about how the world works. When positioning your product, you must consider at least three generations:

The Cultural Revolution generation. Born in the 1950s and 1960s, this generation was shaped by scarcity. Rationing and instability produced a deep, lasting prudence: they prioritise durability, functionality and long-term value, and they save. Brand loyalty isn't driven by marketing here. It is earned through decades of proven performance. They hold significant wealth, often in the form of real estate, but they are cautious spenders and prioritise their descendants over themselves. This generation often controls the household budget. The young person browsing your product may not be the one making the purchase decision.

The Reform Generation. Born in the 1970s and 1980s, they witnessed China's transformation firsthand - from bicycles to private cars and from state housing to property ownership. They are optimistic, aspirational and brand-conscious. They built China's tech sector, staffed its multinationals and became its core luxury market. Their relationship with international brands has matured. Owning a Louis Vuitton bag once signalled success. Now, wearing Lululemon conveys curated value - a shift from pure status to individual identity. They are now in their peak earning years, but they face a dual challenge: funding elite education for their children while supporting their ageing parents.

The digital natives generation. Born in the 1990s and 2000s, they have never known poverty. They grew up in a wealthy, powerful country where smartphones were an everyday fact of life. They are globally fluent, consuming international media and travelling widely, yet also domestically proud. They have faith in China's products and its system. This has fuelled a national movement, with domestic brands such as Li-Ning, Huawei and Perfect Diary now competing with international brands on quality and innovation while also tapping into a powerful sense of cultural identity. Consumption here is experience-first and platform-native. Discovery, evaluation and purchase all take place within e-commerce ecosystems - and traditional advertising is obsolete.