What I Saw in China’s 254th City
While consumption in China’s metropolises turns negative, Chinese brands are blanketing the country down to the last county. A field report.
Introduction: A Conversation in a Didi
This summer, a trip took me to City H, a tier-5 city in the Guangxi province, in southern China -339,000 inhabitants in the city proper (not counting the attached counties), and China’s 254th city by population. The Guangxi region ranks 29th out of 31 Chinese provinces by GDP per capita, at 60% of the national average, ahead of only Gansu and Heilongjiang. For City H itself, the GDP per capita stands at 48,224 yuan, about 6,200 euros per year, and is ranked 275th out of 330 cities.
On the ride from the station, a conversation begins with the Didi driver. He talks of his family of four: two adults, two children. I ask him what life costs here. His answers, precise, are worth every report. Being a Didi driver, in a city like this one, is considered a well-paid job, the equivalent of a local mid-level manager.
The family’s monthly budget exceeds 10,000 yuan (1,200 euros). Food takes 3,000 to 3,500 of it. The mortgage payment, about 6,000 yuan, allows for a 140 m² apartment bought at between 3,000 and 6,000 yuan per square meter, the going prices in the city.
Within these numbers exists two lessons.
First lesson: the plate costs the same everywhere in China. 3,000 to 3,500 yuan per month to feed four people is the budget of an equivalent family in Wuhan or Suzhou. The prices of rice, vegetables, pork, eggs and dairy products are near-national markets. The consequence is direct: the consumer in City H has the budget to buy the same food quality as a consumer in a metropolis. The demand exists, at the same level of expectation. The only variable is access – that is, whether or not the brands are present on the ground.
Second lesson: housing, on the other hand, does not cost the same price at all. 3,000 to 6,000 yuan per square meter in City H (tier 5), versus roughly 13,000 to 15,000 in Wuhan (tier 2), 20,000 to 25,000 in Suzhou (affluent tier 2), and around 60,000 in Shanghai (tier 1). With the same 6,000-yuan monthly payment, my driver’s family lives in 140 m². In Wuhan, they would have 65. In Suzhou, 40. In Shanghai, one bedroom.
Do the full math. A household at 10,000 yuan and above per month sits at the top of the local range, but corresponds to the median urban household of Wuhan. At that level, the trade-off of deep China is simply stated: either the family lives twice as large and more comfortably than in a metropolis, or it reserves as much, if not more, disposable income to spend. Sometimes both at once.
I. The Dianping Inventory: Fifteen Beverage Brands Within One Kilometer
Settled into the Ramada hotel downtown (surprising to see an American hotel here), I open Dianping, the reference app for dining and services. I look for the coffee shops and tea shops nearby, which are the two most dynamic segments of Chinese consumption, the ones where the first yuan of discretionary income goes. What I find within a one-kilometer radius around a single downtown shopping mall exceeds what I imagined.
The entry level is evidently there. Mixue 蜜雪冰城, drinks from 5 yuan, and Luckin 瑞幸咖啡, coffee from 9.9 yuan on permanent promotion. The two benchmarks of their segments: about 64,000 stores across 17 countries for the Mixue group (500 million members, more than half of its stores in tier 3 and below), 31,000 stores for Luckin. Anywhere on Chinese soil, they are there, with the same product, the same app. Their presence in City H is not news. Their absence would have been.
The mid-range is there too. Guming 古茗 and 爷爷不泡茶 (No YeYe No Tea), drinks between 11 and 15 yuan, the pillars of the price band that industry analysts call the golden zone: below 7 yuan, the margin is too thin; above 15, the audience narrows.
And the surprise: premium is there. Chagee 霸王茶姬, the brand that opened in Beverly Hills, has more than five stores in this city alone. Heytea 喜茶 is present. Molly 茉莉奶白 too. In total, within a one-kilometer diameter, at least fifteen beverage brands, some with multiple stores.
I do not conclude that City H is an El Dorado of consumption. I conclude something more precise: there is no fallback market left in China. No rung of the urban hierarchy, from tier 1 to tier 5, is left vacant. The coverage is total, simultaneous, and recent.
II. The Numbers Beneath the Surface
This field observation takes on its full meaning when you overlay it with the national figures for the first half of 2026, which are, on the surface, mediocre.
Total retail sales of consumer goods (社会消费品零售总额) grew by only 1.3% in the first half, versus 5.0% a year earlier. May was negative: -0.6%. Department stores are down 2.1%, and brand specialty stores by 8.7%. More than 17,000 points of sale closed in the first half of the year. The contribution of consumption to GDP growth fell from 52% to 44.7%.
The ranking of major consumption cities, published in early August, confirms the discomfort at the top of the urban pyramid, and, above all, reveals a reversal: Beijing is down 2.5% over January-May, and the symbolic event of the half-year – Chongqing has dethroned Shanghai as China’s number one consumption city, with growth 1.6 points higher than the economic capital’s. Chongqing, that is, the most “working-class” of Chinese megacities, with 32 million inhabitants, a majority of whom live in peripheral districts and counties that look far more like City H than like Pudong.
China’s new number one consumption city is not the showcase of global luxury. It is the metropolis whose sociology is that of deep China.
Beneath the national aggregate, the structure tells the same story. Rural consumption grew 2.5%, twice as fast as urban (+1.2%). In April, urban was negative (-0.1%) while rural grew 2.1%. The share of counties and townships (县乡) now reaches 39.3% of national retail, and it is rising. According to NielsenIQ, county FMCG sales are growing 2.5% versus 0.5% in large cities, for a 43.1% weight of the market. 77 counties now exceed 100 billion yuan of GDP (there were 9 in 2013), with average growth of 6.3%, above the national rate.
The county consumer is changing. NIQ documents the transition from a “pure price” orientation to a double anchor of “practical quality + experience”: quality expectations are up 8 points, preference for local products up 7. This consumer literally lives larger (39% of homes measure 100 to 119 m²), has more children (29% of families have two, versus 19% in large cities), and 40% of households exceed 15,000 yuan of monthly income.
A note of analytical honesty is required: deep China does not reward presence, it rewards adaptation. Of the top 20 FMCG manufacturers, only 4 are growing in the counties; 16 are declining, blocked by distribution that does not penetrate, poorly chosen points of sale, or weak sell-through. Growth has changed address, but it cannot simply be picked up. It must be won, with a product, a price, a channel and a marketing recalibrated locally.
Source: NielsenIQ, 消费再卷县域 烟火气里掘金 – “The consumption battle moves to the counties: the gold rush of everyday China” – July 2026
III. What Starbucks Just Admitted
In November 2025, Starbucks announced it was ceding control of its Chinese operations. Boyu Capital, a Chinese investment fund, took 60% of a joint venture operating the country’s roughly 8,000 stores, on a valuation of about 4 billion dollars. Starbucks keeps 40%, the brand and the intellectual property. The deal closed on April 2, 2026, after 26 years of direct control of the Chinese market.
The new entity’s first strategic plan, announced right after, says it all: growing the network from 8,000 to 20,000 stores, and moving from 1,000 to 1,500 county-level markets in three years, roughly 170 new markets per year, with adapted formats: 10 m² mini-stores, event coffee carts, office locations. Starbucks China CEO Molly Liu speaks of “hyper-localization”.
Translation: the terrain Starbucks neglected for two decades, of small cities and counties, has become its official growth axis. And to go there, the company judged it necessary to cede control to a Chinese partner who knows that terrain.
The detail that gives this note its flavor: in City H, the country’s 254th city, Chagee already has more than five stores. Starbucks is arriving on a battlefield where its premium Chinese competitor is already installed, years ahead, in cities whose existence the Seattle headquarters probably ignored.
These Chinese brands did not “conquer the low end of the market”. They built something else: the capacity to operate at every level simultaneously. Mixue sells a cup at 6 yuan with a 32.4% gross margin, from City H to Singapore, and is listed in Hong Kong. Luckin went from fraudulent bankruptcy in 2020 to 31,000 stores and an entry into the American market. Chagee is present in City H and in Beverly Hills in the same year. The Chinese price war, the most brutal in the world, has forged organizations that master integrated supply chains, extreme cost discipline and rapid product iteration.
Expansion into deep China and international expansion are not two alternative options. They are the same movement, executed by the same organizations, with the same industrial machine.
IV. Take-aways for International Brands
1. Do not read China through the aggregate number. The +1.3% of the first half hides a transfer of growth, not a disappearance. The question is not “is Chinese consumption growing”, but “where did it go”. Answer: to small cities and counties, to services, to value for money.
2. Deep China is no longer a future expansion market. It is already blanketed. Fifteen beverage brands within one kilometer of the country’s 254th city. The cost of entry rises every quarter, and locations are becoming scarce.
3. The competitor you will meet in Paris trained in City H. Underestimating a Chinese brand because it sells at 6 yuan is a reading error: its engine is not price, it is versatility. An organization capable of being profitable in a small Guangxi city and in Singapore simultaneously is structurally very resilient.
4. Presence is not enough. The 16 out of the top 20 FMCG manufacturers declining in the counties prove it. Product, price, channel, marketing: all four dimensions must be recalibrated locally. It is a lesson Chinese brands paid for in cash before mastering it.
5. Change your test of truth. A Chinese partner’s or competitor’s performance in Shanghai no longer tells you anything. The real test is its capacity to operate profitably in cities like City H and in Shanghai simultaneously.
English version contributed by Coline C.