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Signs of Chinese momentum beneath the macro gloom

18 September 2025

China may no longer deliver the breakneck growth it once did, but it remains a dynamic and investable market.

By Nicole Lim,

Thornburg Investment Management

While headlines about China often centre on macro concerns such as geopolitical tensions, property sector woes, or slowing growth, the view on the ground reveals a more nuanced picture.

China may no longer deliver the breakneck growth it once did, but it remains a dynamic and investable market. With valuations still attractive versus global peers and an increasingly self-confident consumer base, domestic brands are gaining share in categories as varied as apparel, electric vehicles (EVs) and cloud services.

Meanwhile, Covid-era behavioural shifts have led to new consumption patterns – favouring comfort, fitness, and in-home premiumisation – offering both opportunities and challenges to global and local companies alike.

On a recent trip to Hong Kong and mainland China, we aimed to cut through the noise and assess the actual trajectory of local brands, consumer behaviour, and sector-specific innovation. The overarching theme: a cautious but real sense of momentum.

 

Cautious optimism on the ground

Despite lingering macro uncertainty, sentiment among Chinese companies was measured but constructive. This year’s tech rally has buoyed confidence, especially among leaders in artificial intelligence (AI) and cloud, while firms across the consumer and EV value chains see growth opportunities both within Asia-Pacific and in export markets like Latin America and Europe.

Companies appeared more prepared for protectionist policies – especially in the US – and are adapting their go-to-market strategies accordingly.

From a valuation perspective, China continues to stand out. Based on 2025 estimates, the market screens attractively for expected earnings growth. While this relative advantage narrows in 2026, compelling opportunities remain in areas with strong secular growth.

 

Post-Covid behavioural shifts

Post-pandemic shifts in Chinese consumer behaviour appear durable. Value remains paramount, but quality, comfort and functionality have become critical purchase drivers. Consumers are prioritising outdoor activities, fitness, and in-home consumption – trends that have persisted well beyond lockdowns.

The result is a more discerning consumer, but not necessarily a retrenched one. Domestic brands are thriving. For international brands, success increasingly depends on strong local execution and branding tailored to China’s hybrid consumption ecosystem.

At the same time, a lingering savings mindset remains – rooted in uncertainty around future policy and macro conditions. Consumers appear to be rationalising their spending but are still willing to pay for quality and purpose-driven products.

 

Appealing sector opportunities

Within e-commerce, platforms in China continue to evolve rapidly, with a clear focus on enabling merchants through AI-powered tools, personalised dashboards, and efficient support structures.

Video commerce is gaining traction and competition remains intense, particularly among platforms targeting value-conscious consumers and cross-border opportunities.

In the cloud space, providers with broad ecosystems and existing customer relationships appear to retain a leading edge. Market expectations for cloud-related revenue growth have been revised upward, reflecting improving sentiment and rising demand for AI infrastructure.

As for retail dynamics, these are reflecting the shifting priorities of Chinese consumers. Demand is stronger in categories linked to comfort, wellness, and affordable indulgence, while more discretionary or fashion-led categories remain under pressure.

Merchandising innovation and global expansion strategies are helping some consumer brands extend their relevance, both at home and abroad.

Finally, China’s AI sector is developing rapidly, with different players establishing leadership across verticals such as video, gaming, 3D modelling, reasoning, and enterprise software.

Scale, data access, and integration with widely used digital platforms remain critical competitive advantages. The ecosystem is benefitting from both public and private investment, and localised innovation is accelerating across foundational and applied models. Early movers with focused use cases are likely to emerge as leaders.

In sum, the pace of innovation and adaptability in China remains striking. While macro risks persist, investors who can identify local champions and monitor competitive dynamics will find compelling opportunities.

Chinese companies are no longer just domestic players – they are increasingly shaping global trends in tech, consumer, and industrial supply chains.

Nicole Lim is an equity research analyst at Thornburg Investment Management. The views expressed above should not be taken as investment advice.

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