China’s economic engine, once the envy of the world, has hit a rough patch. Despite a surge in exports, the country's economy likely expanded at its slowest pace in a year during the third quarter of 2025, according to Bloomberg. This apparent disconnect—booming trade but sluggish growth—has prompted the Communist Party to consider new strategies, including a renewed push for domestic consumption, as leaders prepare for a key meeting next week.
The slowdown is being felt on the ground and in boardrooms around the globe. As Reuters reports, executives from major international companies such as BMW, Fast Retailing (the parent company of Uniqlo), and IKEA are rethinking their approach to the world’s second-largest economy. The reasons are complex: a fragile economic recovery, cautious consumers, and the persistent shadow of the U.S.-China trade war. Add to that rising nationalism and fierce price competition, and you have a recipe for uncertainty that’s forcing many brands to adapt—or retreat.
"We need to find smarter ways of producing so the prices become even more competitive, and we need to learn to be even more relevant for the Chinese market," said Jon Abrahamsson Ring, CEO of IKEA franchisor Inter IKEA, as quoted by Reuters. He added that consumer confidence in China remains a challenge, echoing the concerns of many foreign business leaders.
Foreign carmakers are among those feeling the pinch most acutely. Price wars and U.S. tariffs have made the Chinese market particularly tough for overseas automakers. Meanwhile, domestic brands are on the rise: Chinese companies accounted for a staggering 69% of total car sales in the first eight months of 2025, up from just 38% in 2020, according to Reuters. The message is clear—home-grown competitors are no longer just nipping at the heels of international brands; they’re racing ahead.
It’s not just the auto sector that’s feeling the heat. Nestle, the world’s largest packaged food company, has acknowledged that it needs to focus more on driving consumer demand, rather than just expanding distribution. "What you see in China is us correcting that and actually to consolidate our distribution and make it more efficient, while we build this consumer demand," said CFO Anna Manz, as reported by Reuters.
Technology suppliers are also wary. ASML, the world’s biggest supplier of chip-making equipment, warned of a significant drop in Chinese demand in 2026, describing the situation as a "normalization." Micron, a major U.S. chipmaker, has announced plans to stop supplying server chips to Chinese data centers, according to Reuters. These moves highlight concerns about both demand and the shifting regulatory landscape.
Retailers, too, are seeing a shift. Chinese consumers are increasingly turning to online platforms like Alibaba’s Taobao, drawn by discounted prices and convenience. For Uniqlo, this has meant a drop in sales and profits in China—its largest market with 900 stores—even as North American revenue rose by 24%. In an effort to win back shoppers, Fast Retailing recently sent U.S. basketball stars LeBron James and Ja Morant to China, hoping celebrity power might do the trick.
Alcohol habits are changing as well. Australia’s Treasury Wine Estates pulled its earnings guidance for 2026, citing weak sales of its flagship Penfolds wines in China. The culprit? Fewer large-scale banquets and shifting tastes, according to Reuters.
Yet, amid the gloom, there are bright spots. Luxury brands—those that can offer unique experiences and a sense of exclusivity—are faring better. LVMH, the global luxury giant, reported better-than-expected third-quarter sales, thanks in part to improved Chinese demand and innovative retail experiences, such as a ship-shaped Louis Vuitton boutique in Shanghai. "What we see is whenever we are bringing an initiative or an innovation or a new retail disruption initiative, it creates immediately... interest and excitement and consumers respond very quickly," said LVMH CFO Cecile Cabanis, as quoted by Reuters.
The rise of Chinese home-grown brands is perhaps the most striking trend of all. From cars to coffee, cosmetics to jewelry, domestic players are capturing ever-larger slices of the market. Luckin Coffee, for example, now sells lattes for just 9.9 yuan (about $1.40)—less than a third of what Starbucks charges. Beauty brands like Proya and Chando are expected to push Chinese cosmetics’ market share above 50.4% for the first time in 2025, according to research by Frost & Sullivan cited by Reuters.
Jewelry retailer Laopu Gold, sometimes called the "Hermes of gold," has seen its shares soar 214% this year. The company’s appeal lies in its deep connection to Chinese cultural heritage, which resonates with local consumers. Frost & Sullivan notes that 77.3% of Laopu’s customers also shop at luxury names like Louis Vuitton, Hermès, Cartier, Bulgari, and Tiffany & Co., underscoring the brand’s unique cross-appeal.
Urban Revivo, often dubbed China’s answer to Zara, is another domestic brand making waves, not just at home but with ambitions to expand overseas. Meanwhile, chains like Mixue are undercutting Western rivals such as Haagen-Dazs with cheaper offerings, and Luckin Coffee is going head-to-head with Starbucks for China’s caffeine-loving clientele.
Persistent deflationary pressures have added to the sense of urgency for policymakers. As weak demand and ongoing trade tensions weigh on the $19 trillion economy, many analysts expect that the Communist Party’s upcoming meeting will focus on measures to boost domestic consumption. The Party’s challenge is clear: how to restore confidence and spending power among Chinese households while navigating external headwinds.
Investors and analysts will be watching closely on Monday, when Chinese GDP growth and retail sales data are released, alongside a slew of earnings reports from global companies. These numbers will offer the clearest snapshot yet of the health of the world’s second-largest economy—and may shape the strategies of multinational corporations for years to come.
For now, the outlook remains uncertain. Global brands are recalibrating, local champions are rising, and Chinese consumers are making their preferences known—often in ways that confound the old playbooks. The coming months will test whether government efforts to spur consumption can reinvigorate growth, or whether the "new normal" for China’s economy is here to stay.