CITIC Securities: 2026 will be a crucial year for establishing the turning point in the prosperity of the consumer industry

CITIC Securities Research Report states that the current consumer market is at a critical window of weak recovery and policy expectation negotiations. Based on marginal improvements in macro data and verification from micro high-frequency data, we believe 2026 will be a key year for establishing a turning point in the prosperity of the consumer industry. Due to the still relatively weak macro environment, the self-repair of consumer prosperity is expected to take time. In the short term, overall beta opportunities may focus on the possibility of fiscal stimulus policies. Currently, we believe that consumer investment allocation should adhere to the principle of “maintaining stability while seeking innovation”—building a foundation with high dividends and breaking out with resilient growth consumption: on one side, through policies supporting service consumption and other sectors showing vitality, leveraging policy flexibility and wealth effects; on the other side, constructing defensive positions with high-dividend assets, while closely monitoring opportunities in catering supply chains, dairy products, and other sectors where volume and prices are rising as CPI turns positive. Long-term allocation should continue to emphasize changes in consumption structure.

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Consumption | Maintain stability while seeking innovation—The strategy of offense and defense on the eve of consumption recovery

The current consumer market is at a critical window of weak recovery and policy expectation negotiations. Based on marginal macro data improvements and micro high-frequency data verification, we believe 2026 will be a key year for establishing a turning point in the prosperity of the consumer industry. Due to the still relatively weak macro environment, the self-repair of consumer prosperity is expected to take time. In the short term, overall beta opportunities may focus on the possibility of fiscal stimulus policies. Currently, we believe that consumer investment allocation should adhere to the principle of “maintaining stability while seeking innovation”—building a foundation with high dividends and breaking out with resilient growth consumption: on one side, through policies supporting service consumption and other sectors showing vitality, leveraging policy flexibility and wealth effects; on the other side, constructing defensive positions with high-dividend assets, while closely monitoring opportunities in catering supply chains, dairy products, and other sectors where volume and prices are rising as CPI turns positive. Long-term allocation should continue to emphasize changes in consumption structure.

▍Policy to reduce costs, increase demand from residents, and attract market investment create a threefold resonance.

As outlined in our 2026 strategy report, boosting domestic demand is a clear lever for driving economic growth. Since early 2026, China’s key policies to stimulate consumption focus on continuing and optimizing subsidies for old-for-new exchanges in automobiles, home appliances, and other durable goods, while coordinating more proactive fiscal policies and moderately loose monetary environments to stabilize employment and household incomes. Marginally, policy focus is gradually shifting toward cultural tourism, leisure, and elderly care services, indicating a structural and medium-to-long-term approach to enhancing internal demand. After nearly three years of adjustment, China’s consumer demand has gradually shown signs of bottoming out. Although overall still weak, structural sectors such as service consumption, high-end consumption, and spiritual consumption are showing growth. The low base effect from the 2025 “liquor ban” provides a good backdrop for recovery in consumer data in Q2 2026. Meanwhile, consumer holdings continue to decline and are at historic lows, so any marginal improvement in prosperity could trigger a rebound. We suggest increasing consumer allocations, preparing for a “pre-recovery” phase by focusing on prosperity and maintaining dividend stocks, with a balanced approach awaiting a recovery. The specific strategies are as follows:

Main Line 1: Service consumption is expected to succeed durable goods as a new policy focus.

The old-for-new policy continues into 2026, but given the diminishing marginal effect of subsidies for durable goods, fiscal support is likely to tilt toward service consumption. According to CITIC Securities’ overseas macro team, under appropriate policy guidance, China has the capacity to expand service consumption significantly. Demand-side measures include improving social security to activate savings, ensuring rest rights to avoid leisure time being squeezed, and increasing income share to stabilize expectations; supply-side efforts involve capacity expansion, quality improvement, and developing niche industries to foster new growth points, thereby strengthening the market economy and releasing industrial vitality. Under the expected “service consumption refinancing expansion” and tourism vouchers stimulation, experiential consumption is likely to be supported, with offline sectors such as hotels, catering, cultural tourism, and transportation experiencing a resonance in traffic and performance recovery.

Main Line 2: High-end consumption—initial signs of wealth effect transmission, seeking certainty amid divergence.

In Q3 2025, some core high-end consumption sectors—luxury goods, high-end beauty, air travel, and high-end residential markets in key cities—performed generally better than market expectations. Currently, China’s consumer market exhibits a clear “K-shaped recovery,” with a stark divergence between a rebound in certain sectors and a mild recovery in mass consumption. This pattern is driven by rigid supply-side constraints, wealth effects among high-net-worth individuals, and marginal policy improvements. Key opportunities include those benefiting from wealth effect transmission and supply-side optimization, such as high-end luxury goods, premium beauty products, high-end real estate, outbound travel, gaming, and duty-free sectors (see our December 16, 2025 report: “High-end Consumption Recovery in Consumer Industry—Weak Reality Under Strong Expectations—Seeking Certainty in Divergence”).

Main Line 3: Pay close attention to price transmission mechanisms.

In 2026, China may face significant imported inflation pressures, mainly driven by non-ferrous metals (copper, aluminum) and crude oil, due to global “de-dollarization,” infrastructure development for AI computing power, and tariff-related stockpiling effects. According to CITIC Securities macro team forecasts, under optimistic assumptions, PPI year-on-year may turn positive by May 2026. Focus areas include input-driven inflation pushing up fertilizer and feed costs, which will transmit to agricultural product prices (CPI). The catering supply chain is expected to see a “Davis double play” due to inventory revaluation and substitution effects: leading companies could benefit from short-term gross margin expansion by utilizing low-cost inventories; meanwhile, inflation pressures may prompt downstream restaurants to cut labor costs and accelerate procurement of standardized semi-finished products, increasing supply chain penetration.

Main Line 4: Deposit interest rates continue to decline; embrace certainty and free cash flow amid “asset scarcity.”

In the macro environment of low interest rates and “asset scarcity” in 2026, most sub-sectors of the consumer industry remain in a “wait-and-see” state. The core logic for high-dividend consumer stocks is shifting from pursuit of high growth to embracing “certainty premiums” and “free cash flow.” Coupled with sustained allocations by long-term funds and policy-driven market value management by state-owned enterprises, such assets are becoming scarce options with both defensive and yield resilience.

Risk Factors:

• Unexpected slowdown in economic growth leading to greater-than-expected demand decline;
• Policy changes exceeding expectations across industries;
• Unexpected inflation surpassing forecasts, affecting profitability due to limited pricing power;
• Implementation effects of existing consumer-promoting policies falling short of expectations.

Investment Strategy:

The necessity of expanding domestic demand has been repeatedly emphasized in recent important meetings. We expect the government to continue boosting residents’ consumption and income: on the consumption side, likely continued subsidies for goods in 2026, with an expanded scope; the importance of service consumption will grow, with subsidies extending to experiential sectors; on the income side, the government will continue stabilizing employment and income expectations and improving social security, though the real estate market’s stabilization remains uncertain and requires positive signals.

We believe 2026 will be a pivotal year for the consumer industry’s recovery. Given the still weak macro environment, the self-repair process will take time. In the short term, overall beta opportunities may focus on fiscal stimulus policies. We recommend a “barbell strategy”: one side, leveraging policy flexibility and wealth effects through service consumption; the other, building defensive positions with high-dividend assets, while closely monitoring CPI turning positive and the associated volume and price increases in catering supply chains; long-term, emphasizing structural changes in consumption.

(Source: First Financial)