Singles' Day: A truce, but will China shop?

China's annual Singles' Day shopping festival ended on an unusually subdued note, a sign of malaise in the world's second-largest consumer economy. A trade truce with the United States, agreed in Busan on 30 October, did nothing to loosen Chinese shoppers' purse strings.

The festival itself has changed in ways that hide the weakness. Alibaba stopped publishing a headline sales figure after 2021, and the promotions now stretch across several weeks rather than a single day, so year-on-year comparisons flatter whoever makes them. What the platforms and merchants do report points to volume bought with price cuts.

Households still repairing

Easing trade tensions abroad has not fixed the problem at home, which lies in household balance sheets. Property values are still falling after several years of decline and youth unemployment remains high, so families are saving to repair their finances. Gross merchandise value (GMV) across Alibaba and JD.com was flat or grew in the low single digits, almost all of it from heavy merchant discounting.

Housing is where most Chinese families keep their wealth, which is why the slump bites so hard. The property downturn began when Evergrande defaulted in 2021, and the developer was removed from the Hong Kong stock exchange this August after a court ordered its liquidation. Each year of falling prices makes owners feel poorer and more inclined to pay down mortgages early or hold cash, and deposits pile up in banks rather than flowing into shops.

Subsidies cannot fill the gap

Beijing has tried to help. A trade-in scheme financed by ultra-long special treasury bonds pays households to replace cars, appliances and phones, and it lifted sales of those goods earlier in the year. Such programmes bring purchases forward rather than create new demand, and a fridge bought in the spring is not bought again in November. The government's campaign against 'involution', its term for ruinous price wars, also sits awkwardly with a festival built on discounts.

The broader price data tell the same story. Factory-gate prices have fallen year on year for three years, and consumer inflation has hovered around zero. In a deflationary economy waiting is rational, because goods are likely to be cheaper next month, and merchants who cut prices to hit volume targets reinforce the habit.

Platforms pay for volume

The summer showed where discounting leads. Alibaba, JD.com and Meituan fought a costly battle in instant delivery of meals and groceries, subsidising orders so heavily that regulators summoned them to rein it in, and their reported profits suffered. Singles' Day repeats the pattern on a larger scale. Merchants fund much of the discount themselves, so their margins shrink along with the platforms', and the cheap goods teach shoppers to wait for the next promotion.

The official response has been more talk of consumption than money for it. The Communist Party's Fourth Plenum in October endorsed proposals for the next five-year plan that promise to raise household consumption as a share of the economy, a goal Beijing has set before with little result. In July it introduced a national childcare subsidy of 3,600 yuan a year for each child under three, one of its first direct cash payments to families. The sum is too small to move aggregate spending, but it sets a precedent that bigger transfers could follow.

Bad news for Western brands

For Western consumer brands, from luxury fashion houses to carmakers, the lesson of Singles' Day is sobering. A tariff truce cannot conjure up domestic demand.

Foreign firms are losing on two fronts at once. Spending is weak, and domestic rivals are winning the share that remains: local electric-car makers have taken ground from German and Japanese brands, and home-grown labels have gained on imported cosmetics and coffee. Starbucks agreed this month to sell control of its Chinese stores to a local investment firm, Boyu Capital, a decision that says a good deal about how multinationals now rate the market.

The winners inside China are the discounters. Platforms built around low prices, such as PDD's Pinduoduo, and domestic brands that sell good-enough products cheaply suit a shopper who is trading down. Luxury houses depend on the confident middle-class buyer that falling property prices have made cautious, and they have also lost the gifting trade that disappeared with the anti-corruption campaign.

Where the argument could fail

The counterargument deserves a hearing. Chinese consumers still spend on experiences and novelties, as this year's record box office for the animated film 'Ne Zha 2' and the craze for Pop Mart's Labubu toys showed. Services, travel and small indulgences are holding up better than big-ticket goods, and a shift in spending mix can look like weakness in a festival built around physical products. The pattern resembles Japan in the 1990s, though, when households and firms kept spending on small pleasures while paying down debt and avoiding large commitments, and rock-bottom interest rates did little to change that.

The signals to watch are monthly retail sales and consumer prices, new-home sales, and the annual Central Economic Work Conference in December, which sets the tone for next year's fiscal support. A decision to send money directly to households, rather than to factories and infrastructure, would change the outlook. Singles' Day 2025 showed that settling trade disputes does little for exhausted Chinese consumers. China remains stuck in a deflationary liquidity trap that no trade deal will fix, and Western brands selling there will probably face weak sales for some time yet.