Unlocking growth via county-level markets

China's vast county-level markets are rapidly evolving beyond a cheaper extension of urban markets into an increasingly important source of domestic consumer growth, industry experts and data show.

According to data from the National Bureau of Statistics, retail sales of consumer goods in rural areas climbed 2.4 percent year-on-year in the first seven months of this year, more than double the 1.1 percent growth in urban areas. Today, county and township economies generate approximately 40 percent of China's total GDP.

Rural retail growth has outpaced or roughly matched urban growth for 55 consecutive months, a span of more than four years, highlighting the durability of a shift in consumption toward smaller markets, said Zhou Mi, a senior researcher at the Chinese Academy of International Trade and Economic Cooperation.

"Covering more than 90 percent of the nation's land area, county-level markets form complete, independent economic units with diverse consumption scenarios," Zhou said. "With rising living standards and incomes, pent-up demand for high-quality lifestyles is surging. This is being met by an influx of major retailers expanding downward, creating an efficient supply-and-demand alignment."

Crucially, experts note that county-level consumers enjoy a distinct structural advantage. "Compared with cities, consumers in county-level areas generally face significantly lower burdens for housing, mortgages and daily transportation," said Chen Liping, a professor specializing in retail at the Capital University of Economics and Business. "This lower cost structure frees up substantial disposable income, fostering stronger willingness to spend and higher resilience against economic headwinds."

However, stronger demand does not automatically translate into stronger brand sales. According to a recent report by market research firm NielsenIQ, also known as NIQ, county-level fast-moving consumer goods sales expanded 2.5 percent year-on-year, five times the 0.5 percent growth recorded in tier-one and tier-two cities. Yet, among the 20 leading FMCG manufacturers tracked by NIQ, only four posted sales gains in county markets, while 16 saw declines.

"County markets are no longer just a 'delayed version' of top-tier cities," said Ding Na, retail insights manager at NielsenIQ China. "Simply relying on downward channel expansion and price wars is no longer enough. Brands need to tailor their strategies to distinct local lifestyles and generational demands."

NIQ data show 53 percent of county consumers remain price-sensitive, while quality, practicality and experience are becoming more important. Consumers under 30 have relatively strong purchasing power and are increasingly interested in technology, design and new experiences, while older consumers tend to place greater weight on practicality and reliability.

"The diversity of county-level markets means businesses have broad room to develop new service models and create new momentum for consumption," said Shen Bing, a researcher at an institute under the National Development and Reform Commission.

Policy tailwinds are set to accelerate this transition. The Ministry of Commerce and eight other government departments released a guideline recently, setting out 18 measures covering upgrades to retail infrastructure, business format innovation, the supply of goods and services, distribution networks and financial support.

"County and township markets now hold the key to further consumption growth," said Yuan Xiaoming, assistant minister of commerce.

lijing2009@chinadaily.com.cn