Bernstein: China’s consumption divide deepened in the third quarter, with resilient premium demand but overall spending still weak

Why hasn’t the economic improvement boosted consumption yet?

China’s GDP grew 4.5% year on year in the third quarter of 2026, above the 4.3% recorded in the second quarter. Retail sales grew just 0.7% year on year over the same period, above the second quarter’s 0.2% but still below the first quarter’s 2.4%.
Credit and real estate remain constraints: the credit impulse fell to approximately negative 4% in September, and home prices across 70 cities continued to decline year on year in the third quarter. Bernstein expects the divergence between premium and mass-market consumption to continue.

The wholesale price of Feitian Moutai recovered after channel reforms and two increases in its ex-factory price during the year. However, wholesale prices for standard Wuliangye and Guojiao 1573 remained under pressure from excess channel inventory, showing differences within premium baijiu as well.
Luxury demand generally slowed in the third quarter, while spending by affluent customers was relatively steady. Operating trends improved for some brands in September and early October, but the recovery in Swiss watches remained fragile. Bernstein noted that October is typically a smaller sales month in the fourth quarter and that the second half of the quarter is more important.
By comparison, beer sales at the point of consumption fell 1% year on year in the third quarter, versus growth of 2% in the second quarter. Growth of 3% in September was partly driven by the earlier timing of the Mid-Autumn Festival.

Sportswear sales on Tmall, Taobao, Douyin and JD.com rose 1% year on year in the third quarter, compared with 10% in the second quarter. Bernstein’s channel checks show that retailers’ expectations for market growth in 2026 have fallen from above the mid-single digits at the start of the year to the low-to-mid single digits; discounts are widespread and channel inventories are still rising.
Brand performance diverged: growth in Nike’s running business was insufficient to offset a decline in its larger lifestyle business. A major Chinese partner said Nike’s excess inventory rose from 1 to 1.5 months at the start of the year to 3 to 4 months. Adidas still achieved strong double-digit online sales growth in the third quarter and gained share.

China’s online beauty sales fell approximately 16% year on year in September. Third-quarter sales at the beauty companies tracked by Bernstein fell 8.7% year on year, but their combined market share rose by 1.5 percentage points, indicating that their collective decline was smaller.
By company, L’Oréal’s online sales rose 4% year on year over the past three months, while Unilever’s beauty and personal care business fell 18%. The tracking covers Tmall, Taobao and Douyin, excluding physical stores and travel retail, including Hainan.

Retail insurance registrations for passenger vehicles totaled approximately 4.7 million vehicles in the third quarter, down 24% year on year. New energy vehicle sales were approximately 3 million vehicles, down 11.8% year on year, but their penetration rate rose from 54.9% a year earlier to 63.5%. Demand pulled forward by previous subsidies, a high comparison base and weak consumer sentiment together weighed on sales.
Bernstein expects domestic retail demand for cars in 2026 to be 19 million to 20 million vehicles, down 15% to 17% year on year. Exports are expected to reach 9.5 million to 10 million vehicles, up 50% to 60%, supporting industry growth.
Revenue per available room at Chinese hotels declined year on year from 7 through August and edged up only slightly in September. Year-on-year growth in hotel supply slowed to 2% in September. Bernstein believes that a recovery in demand and a continued slowdown in supply growth would help improve room revenue.