For two decades, the Finnish elevator and escalator maker KONE climbed China's urbanization boom to the top of the sector. China became KONE's single largest market, at one point contributing over a third of its global revenues of $9.9 billion. Its logic was simple: China was building, and KONE—like many other companies—simply rode the surge.

It's no surprise "granularity of growth" never caught on with our clients back in 2008. That year, our US and European colleagues published a book by that title, arguing that in flat markets, companies must "de-average"—drill down into the smallest meaningful "cells," or micro-markets, micro-segments, and precise plays—to cobble together a growth strategy. The book was a global business hit.

Clearly, The Granularity of Growth: How to Identify the Sources of Growth and Drive Enduring Company Performance was written for mature markets, and China in that era was anything but. Its economy grew nearly 10 percent the year after the book launched and spent the next decade cruising in the high single digits. No company needed a microscope to find opportunity—and we sometimes say you barely needed a map. Low baseline penetration rates made broad categories like "snacks," "fresh coffee," and "EVs" sufficient, and a single Unilever soap could serve consumers from Tiers 1 to 4 simply because it was considered a famous brand. When segmentation appeared at all, it meant sorting cities by tiers—crude but effective when everything was rising.

That was then, this is now. As China's economy slows, market share will no longer be won on wide, growing plains, but in pockets containing specific behaviors, micro-tribes, and still-rising hyper-local curves. For example, it's important to know that China's most optimistic consumers today live in smaller cities, not in Tier 1—yet even "tiers" are too blunt. Growth now depends on matrices gridded by tastes, occasions, experiences, brands, and behaviors, to name just a few.

We see young single women in city cores, pet owners, health enthusiasts, "silver" consumers seeking travel experiences, China-chic fans, anime-manga communities, and other micro-groups, each fueling distinct categories of spending. Even in seemingly commoditized sectors—elevators, noodles, package delivery, industrial chemicals—growth is now district by district, flavor by flavor, segment by segment. "Granular growth isn't just about finding a new sub-segment and shifting your portfolio," says Antonio Sun, a McKinsey senior partner in the global energy and materials practice. "It's also about extracting value—whether upstream, downstream, or into adjacent capabilities like digital—and how you participate in that."

Whereas the old game was "show up and scale big," the new game is "compete surgically." KONE's new reality reflects this shift. Its earlier model was built around mega-developers during the greatest real estate run in human history; the country's top builder casually booked more than $50 billion in sales—many times the $1.8 billion that Blackstone's US development arm made in 2015.

In China, a single fifteen-tower complex could mean dozens of elevators—a gold rush so strong that Beijing sometimes felt like a Finnish "satellite" in China, as a McKinsey Helsinki partner would joke. At Nick's daughters' primary school in 2010s Beijing, entire classrooms of Finnish children gathered on Saturdays for Finnish lessons so they wouldn't lose their mother tongue. The names on their parents' business cards: Nokia, KONE, Stora Enso, Suunto.

China's property cycle eventually turned. Housing starts fell more than 60 percent in 2024 from their 2019 peak, elevator and escalator installations dropped by a tenth, and KONE's China story seemed to fall straight to the bottom of an elevator shaft. In 2022, Joe Bao, former head of Microsoft China, was brought in to reset the trajectory, and his approach was "in the granular," so to speak. "Our way out would be to learn and grow and innovate," he told us in Shanghai recently. "Figuratively speaking, there are no high-rises in Finland."

There would be no grand transformation. Instead, KONE made a sharp pivot to services. China's eleven million installed elevators—40 percent of the global total—each require maintenance every fifteen days, creating a huge service economy dominated by thousands of small operators. KONE set out to consolidate that market through selective acquisitions, raise the productivity of its twenty thousand technicians, and deliver tangible savings through digitizing operations and maintenance. Next came modernization and green retrofits, and a targeting of niches: "Think about freight, data centers, villas, and rural buildings," Joe Bao says, ticking them off. KONE has had to go deep—district by district, county by county, community by community—to find pockets of potential growth.

We see the same logic across consumer goods, healthcare, education, food services. For one coffee client, we found that Beijing and Shanghai had plateaued, while Tier 3 cities accounted for 38 percent of all outlets in China and were expanding twice as fast. Going a level deeper, we found real growth came not from daily loyalists but from "occasional drinkers" who indulge once or twice a week—a micro-behavior with potential.

"In the past we didn't focus as much on smaller segments because the overall economy was growing so fast," says Frank Tang, chairman, CEO, and co-founder of Chinese private equity player FountainVest. "Today, those pockets define where the opportunities are because the segments are already at scale. If the whole market is only growing at 3 to 5 percent, then the right geography and consumer segment become everything. It's bottom-up now."

China executives see it, too. Phyllis Cheung, CEO of McDonald's China, has recently re-read McKinsey's The Granularity of Growth: "I appreciate that book. It's very relevant to us right now." Anne Tse, CEO of PepsiCo's Asia Pacific Foods, says, "No China chart has a single dimension; everything is something by something. Step one is the 'average need,' and then it's about city tier, cohort, occasion, price tier, then channels, and then competition in these slices. The whole Rubik's Cube is super-complex."

There's no universal playbook for finding granularity—opportunities differ widely, and each pocket is uniquely shaped. By the way, identifying growth pockets is only half the job. The real test is execution: empowering employees who directly interact with customers, moving at the pace of local dynamics, and adapting as micro-markets shift in real time.

In the pages ahead, we'll look at how several companies dug deep, adapted, and built growth opportunities cell by cell.

We sometimes describe the "granularity" shift in asset management terms as moving from "beta" to "alpha." In the 2000s, buying almost any property in Beijing or Shanghai could earn a ten- to twenty-fold return—townhouses, apartments, business districts—it barely mattered as long as you were willing to invest. Today, real estate growth is still there, but the game has changed from riding the market ("beta") to earning returns through precision ("alpha"): the right street, the right building type, the right floor, the right price, the right leverage.

Geography offers the simplest form of granularity. Coastal hubs remain huge but have lost post-COVID momentum, while lower-tier cities have become growth engines. Yet even there, companies must slice thinner. Try demographics: nearly 75 percent of millennials in lower-tier cities are confident about China's economic outlook, compared with 65 percent in top-tier hubs. And companies that focus by income will see that confidence among mid- and high-earning millennials climbs above 80 percent. Lower living costs, cheaper housing, and more stable jobs—often in government or large enterprises—translate into higher purchasing power than that experienced by mega-city peers, even if absolute wages are lower.

But picking the right city is only the beginning. Within each city, you still need the right district, street, and channel. Some value comes from pricing and distribution; other pockets emerge through sub-brands, in-store experiences, or digital ecosystems. And the "tiers" categorizations themselves need macroeconomic context. Northern provinces remain tied to steel and other legacy industries, and young workers have moved south.

As McKinsey's Asia consumer and retail co-leader Daniel Zipser puts it, "China has more than nine hundred cities and thousands of counties. Where do you put your marketing money? Where do you actually distribute? It's a critical strategic question—this ability to pinpoint what is promising." For example, in targeting the consumers considered "very important"—the power shoppers spending north of €15,000 ($17,400) annually on a single luxury brand—it's critical to have a deep understanding of each local market, explains Michael Straub, the China commercial director of Loewe, the Madrid-based luxury house owned by LVMH. "For instance, Shenyang remains a top destination for silver generation 'older money' luxury shoppers," Michael says. After two decades of expansion, growth in China's beauty industry has stalled, and one skincare executive tells us he's thinking about the hundreds of cities in China as distinct markets, some growing, and many requiring precise targets and hyper-local execution.

How to tap granularity depends on your category, customers, and model—whether you sell infrastructure, snacks, or medical devices. Our playbook isn't a marketing checklist but rather a strategic shift: if the floodlight worked before, now you need a spotlight.

For fifteen years, ANE Global Logistic grew by blanketing China: thirty-three thousand franchise partners—mostly mom-and-pop couriers handling the first and last mile. The company specialized in less-than-truckload (LTL) cargo—too big for a courier yet too small for a full truck—connecting the noodle maker to the neighborhood stores, the appliance factory to the township warehouse, the auto parts plant to the repair shop three towns over.

ANE's scale enabled a cost structure and speed that few could match. But e-commerce growth was slowing, average delivery prices were flattening, and a price war was inevitable. That realization prompted ANE to pivot early—well before a roughly 15 percent industry price collapse in 2025. ANE's story shows that granularity is not only about spotting micro-pockets of growth but also about rewiring its organization so those pockets can be captured.

Under founder and CEO Xinghua Qin the question shifted from "How large can we grow?" to "Where exactly is growth hiding?" Xinghua eliminated the "regions" layer and split the national profit and loss (P&L) into forty-four district-level units, each with its own balance sheet, profit targets, and mini-CEO. "Let the headquarters feel the battlefield. We put our back offices onto the front lines," Xinghua says.

The new structure unlocked route-level visibility. ANE could analyze profitability by lane, weight band, and service type—pinpointing which corridors and customer clusters created value and which quietly eroded margin. Their analysis was so granular that it distinguished between a washing machine delivered to a home versus a construction-site dormitory—different occasions, different price points. Some corridors outperformed, especially those serving large enterprise clients in the east, while others in remote western provinces required subsidies. "This opened our eyes to what sub-segments we were betting the future on, and which were dragging us down," Xinghua tells us. "It was time we migrated into a more granular, more scientific approach to our operations."

With automation and real-time dashboards, ANE improved operational visibility and could shift resources quickly. Decision-making became data-driven, and pricing became tailored: premium, guaranteed-time services for electronics shippers in major cities, with slower, consolidated routes in smaller, price-sensitive markets. Each micro-market became its own experiment.

Incentives were rewired. District mini-CEOs earned unlimited profit sharing above targets, which re-energized the network. Prospective franchisees received income models comparing ANE with rivals, often showing higher earnings within a year by switching.

ANE's franchise system kept costs low, enabling a near-zero profit policy on trunk hauling and last-mile delivery. It could offer next-day for some routes at roughly a third of air-freight costs, setting the bar for delivery speeds and real-time tracking. Profit came not from shipping fees but rather from volume efficiency, network effects, and adjacent services such as dispatch surcharges and documentation fees, which ANE reduced by 95 percent through digitization. With county-level coverage across 99 percent of China and AI-guided routing and sorting, ANE offered value while rivals raced to the bottom.

This two-step strategy—drive costs down, then optimize by segment—powered ANE's recovery. In two years, the bottom line swung from roughly 200 million RMB ($29 million) in losses to nearly 960 million RMB ($137 million) in profit. Depot productivity rose 20 percent, trucks were going out more than 85 percent full, and route-level profitability strengthened.

Most importantly, ANE shifted its mindset. Managers stopped measuring success by gross volume and instead focused on micro-markets, order density, on-time delivery, customer satisfaction, and lifetime value—creating advantages that its competitors couldn't capture.

It took Nick a few years to master the strategy of surviving a Chinese business banquet. The negotiations might be complete, but there's still work to do in handling a blur of tiny shot glasses. "Ganbei! Ganbei!"—"Empty glass! Empty glass!"—and down it goes. You must imbibe without appearing ungracious—but also avoid ending the night face down. Korean colleagues, seasoned in ritual drinking, had taught Nick the craft: the hand towel beside your glass could discreetly absorb a portion; plain water could be swapped in at key moments; and toasts could be made early—to fulfill that social obligation and reduce the likelihood of being targeted for later, more punishing rounds.

What's normally in those glasses is Moutai, China's national spirit, 52 percent alcohol by volume, distilled from sorghum, aged and fermented to create different aromas. Also called baijiu, it's more than a drink; it's a social lubricant and currency of relationships in Chinese business. The market for baijiu rode the country's economic rise, and it's huge: roughly 700 billion RMB ($100 billion), dominated by a small number of national giants and hundreds of regional houses.

For decades, growth was straightforward. Baijiu's core consumers were established men in government, banking, and real estate—and rising incomes and banquet culture helped fuel margins of 30 to 40 percent. State-owned Kweichow Moutai sat at the apex—around a quarter of industry revenue, nearly half its profit, and a market cap of about $250 billion. At its peak, a bottle sold for 3,000 RMB ($429), the sort of price that signals prestige rather than pleasure. But the market has shifted, and per capita consumption is declining. Producers must adapt.

In short, younger consumers drink differently: small groups, late at night, and always online, and they're a latent growth engine. Distillers are halving alcohol content to 19 to 20 proof, launching 200 ml mini-bottles, and re-designing packaging for emotional appeal. Wuliangye, the No. 2 producer, has launched a low-alcohol "Love at First Sight" bottle at 300 RMB ($43). Others target mid-tier price bands to expand its market reach and even to create new occasions for consumption.

Though per capita volume may be flat, drinking moments are rising. "Because the industry is innovating—beverage lines, packaging, online channels—the younger segment is picking up even as consumption slows," says Michael Chi Chen, a McKinsey consumer partner who leads the Firm's work in beverages.

Even category leader Moutai is adjusting. In 2025, it launched an invite-only released on WeChat, tested smaller 200 ml packs at a third the usual price, and pushed expansion into ten key markets across the US and Europe.

Regional champions are strengthening their home turf. Kouzijiao—a 6 billion RMB ($857 million) brand in 63 million-strong Anhui province—is mapping growth by county and point of sale, using AI to optimize planning. Its producer, Anhui Kouzi Distillery, is tailoring products to local tastes and building "liquor-tourism" parks and immersive brewery experiences to deepen home ties. With 80 percent of its revenue still in Anhui, Kouzijiao is prioritizing consolidating local turf over national expansion.

Distribution is being rewritten. Bottles historically moved through five to six intermediaries; online platforms now allow producers to bypass them. "Older consumers go to mom-and-pop stores; younger people buy online," Michael says. E-commerce has grown at double-digit rates for three consecutive years, driven by Douyin and RedNote livestreams that can sell thousands of bottles in minutes. Influencers frame baijiu as a part of life's milestones—weddings, births, big family dinners.

Global expansion is the next frontier, though baijiu's bold flavor and tight link to Chinese dining make adaptation harder than for Japanese sake. Producers are testing lighter blends, Western pairings, cultural sponsorships, and heritage-led branding. Baijiu's next wave of growth will come from re-engineering its occasions, formats, and markets.

PepsiCo was the first Fortune 500 company to invest in Shenzhen—a landmark in China's economic opening. Its debut product was Pepsi-Cola, launched in 1982 out of the Shenzhen Yinle Soda Factory at just 0.55 RMB ($0.1) a can—five times the cost of a Beijing movie ticket or subway ride at the time. Foreign yet affordable, the red, white, and blue cans captured Chinese interest and ushered in modern soft drink culture. The company's food business entered China a decade later; Lay's and Cheetos were two of the first packaged snack brands introduced, and later, Quaker Oats helped create demand for these products, building the supply chain needed to make and distribute them across the country.

Over the decades, PepsiCo expanded from market education to market leadership—broadening its beverage lineup, localizing production, and introducing brands like 7UP, Mirinda, and Gatorade—constantly fine-tuning to local tastes and lifestyles. Snacks show this granular strategy clearly. Agility is far higher than in beverages, and consumer tastes are more nuanced, says Anne Tse of PepsiCo's Asia-Pacific Foods.

And there's plenty of potential: in savory snacks, per capita consumption in China is just two kilograms (4.4 pounds) a year, compared with seven kilograms (15.4 pounds) in Australia and fifteen kilograms (33.1 pounds) in the US. To capture market opportunities, PepsiCo's China strategy operates as that Rubik's Cube, as we've mentioned, solving for multiple dimensions at once.

First, the snack market is not "just snacks." Its complexity requires examining the market via different cells: city tiers, age groups, lifestyle "states," social media ecosystems—each with different growth dynamics. When geography is overlaid, the story gets even more detailed. Consider township- and county-level markets, which have grown faster than those in top-tier cities as more people return to lower-cost hometowns. And within any single tier, consumer needs vary widely. Tier 4 cities, for example, aren't just one cell: younger consumers often enjoy more relaxed lives than their mortgage-burdened Tier 1 peers, while older "silver" (over age sixty) consumers are wealthier, healthier, and increasingly drawn to wellness and more personalized experiences.

Granularity, or occasions for consumption, also plays out in moments: in Quaker, PepsiCo is designing products for specific needs: quick breakfasts, wellness options for white-collar workers, grain snacks for teens, and porridge-based meal replacements for families, to name a few.

Further segmentation centers on emotional meaning; Lay's is developing province-level flavors that turn regional tastes into identity markers, tapping rising demand for belonging and "China-chic" aesthetics. Anne points to Gen Z youth who cut back on food to spend 600 to 800 RMB ($86 to $114) on video game "skins"—cosmetic digital items—or professional cosplay makeup. "Brands that tap into emotional value are thriving," says Anne. "When you look at the aggregate, things seem tight. But once you de-average, opportunities emerge."

Media varies not just by geography but by consumer mindset, or "state." In Shanghai, discovery happens through RedNote. In Tier 4 cities, consumers may still be in category education—what are chickpea crisps?—and in-store promotions can do the job. Same brand, same packaging—different attention architecture. The "when" matters, too: inspiring the right occasions. "It's all a question of different intentionalities," Anne tells us.

This is granularity—not just finding the segments but also building an operating system capable of dozens of small, local, fast, autonomous moves. PepsiCo's snacks division is just one example of a native granularity model inside a multinational: a five-to-six-dimensional "cube" of growth that never sits still: "It's very dynamic. The rate of change is very high," says Anne, "and powering decision-making at that level is very difficult to do."

Louis Vuitton's newest Shanghai activation isn't a boutique. It's a hundred-foot-tall stainless-steel-and-glass vessel called The Louis, docked on West Nanjing Road and engineered to create feelings and emotions.

For years, LVMH, the world's largest luxury house, could move handbags by the thousands to China's rising urban elite. In peak years, LVMH drew a third of its fashion and leather goods revenue from China, while Chinese consumers at home and abroad spent $115 billion on luxury—a third of global spend. But as consumers grow more sophisticated, brands now face sharper, more selective, and value-conscious audiences after a softer 2024 and a steadier 2025. The new granularity is around creating experiences and seeding desire, which invites consumers to "come feel something, even if you buy later or elsewhere."

Hence the surge of cultural activations, bars, pop-ups, film sets. Nearly every major house now runs a cinematic experience. Luxury in China has become a stage, not a shelf, because "Chinese consumers decide inside China what they'll buy in Tokyo or Paris, and that's why brands are working so hard to create aspiration there," says Daniel Zipser, head of McKinsey's Asia consumer practice.

Experiences are central to this strategy. Nodding to Shanghai's maritime heritage, The Louis is the most ambitious of these moves, declaring, "We create culture—come and experience it." When we visited in fall 2025, the vessel had a waiting list. Visitors drift through floating monogram trunks, a stairwell lined with pastel perfume bottles, Shanghai-inspired cuisine, and film screenings curated by Jia Zhangke—and take pictures to share.

Conversion rates—the share of visitors who actually buy—are low, below 5 percent, says Natalie Liu, a retail senior manager at Louis Vuitton Shanghai—but that isn't the point. The ship is an experiment built for the social media era, and engagement has exploded; by the year's end in 2025, #TheLouis had clocked more than twenty-seven million hits on RedNote and over two hundred million on short-form video platform Douyin. "We're seeding our future customers," Natalie says.

The ship also widens the funnel of the market. Half its visitors are still in college and might leave with nothing but a charm attachment and photos. Middle-class tourists from smaller cities may buy a classic logo purse or simply file away the aspiration. VIPs—more than thirty monogrammed trunks at 400,000 RMB (about $57,000) were sold in the first two months—receive access to a private café. "Consumption habits across cities and classes are distinct," says Natalie. "We have to adjust."

But even theater has its limits. "China has matured. Values are changing. Perhaps people just don't want to spend that much on a handbag," says Alicia García-Herrero, chief Asia-Pacific economist at Natixis. Max Mara's China CEO, Asina de Branche, agrees: "The new generation is shifting their engagement with luxury. Resale value is important. They're asking 'Are the prices worth it?' How do you create the experience and the value they are looking for?"

The Louis is a major marketing win and part of a fast-growing list of experiential bets by luxury brands. Hermès has turned its Beijing flagship into a multisensory showcase; Chanel's Shanghai atelier takes clients behind the scenes; Dior is staging immersive fashion-and-art exhibitions; Moncler's 2024 "City of Genius" in Shanghai spanned thirty thousand square meters (322,917 square feet) and drew eight thousand guests with fifty-seven million livestream views. Tiffany & Co. built an entire showcase inside a historic Shanghai shikumen (stone gate)–style neighborhood in 2025.

Taken together, these efforts capture China luxury's paradox: slightly softer product demand paired with a powerful hunger for experiences—a category in which spending is still rising 7 to 9 percent a year. The question is whether these spectacles are the blueprint for luxury's next phase—or a sign of searching for growth after the boom.

Everyone talks about targeting micro-segments, but few companies know how to do it. Rewiring an organization to act on micro-pockets is a completely different game; it requires shifting decision rights, incentives, and capabilities so that teams can make sharper, speedier, and more local choices in pricing, channels, product design, and activation. When we look at KONE under Joe Bao, what has mattered isn't just the strategic pivot toward servicing and modernization but also how the company reorganized to train entirely new muscles.

The first move was talent. KONE retrained thousands of staff and recruited aggressively from automotive, consumer electronics, and tech—industries with exactly the skills the company needed for its plans: digital field service, predictive maintenance, consumer-grade experience design. "They brought insights that didn't exist in our industry," Joe Bao tells us. KONE then rebuilt its operating model around these skills, pivoting from a master-apprentice service model to Internet of Things (IoT)–based operations—wiring elevators so technicians could seen problems before they occurred. It allowed servicing of this elevator in that building under these conditions—each a data-rich micro-system with different service levels, pricing, and customer conversations.

Sales had to be rewired, too, with teams pivoting from developer boardrooms toward residents' committees, local property managers, and homeowners' associations—an entirely different customer base with a diversity of needs. Incentives shifted accordingly: less celebration of one giant developer win, more reward for accumulating dozens of smaller ones.

KONE's acquisition strategy also turned granular, buying locality instead of scale by stitching together the most promising "orphans" in a market dominated by thousands of small operators. It expanded the portfolio into niche micro-markets and also re-branded itself accordingly: industrial gray color schemes were out and warm blues and greens were in, signaling digitization and sustainability. "I never thought I'd be thinking about colors," Joe Bao tells us. "But modernization is a consumer play; we have to win hearts and minds." The company is now engaging with key influencers.

The company continues to evolve. KONE's most profitable pockets come from the most difficult part of its strategy: shifting from B2B to B-2-small-B or B2C, which include building and individual owners. Profitability overall has declined, yet KONE has steadily flipped its China mix from 80/20 new equipment versus services to a more durable 50/50.

ANE also re-designed its operating model to capture granularity. As we discussed, the company broke its market into forty-four micro-P&Ls based not only on geography but also shipment purpose and weight class. Once they saw the pockets, they rewired to tap them: each mini-CEO was incentivized with uncapped commissions and the authority to move pricing, channels, and product offerings.

Downstream execution shifted, too. ANE didn't wait for franchisees to discover the company. Operators walked into non-network last-mile delivery stations and showed—using that franchisee's own volume—how profitability could change if they joined. Delivering on such a micro-level required an architectural overhaul: new resource allocation logic, a re-designed incentive stack, and decision rights placed closer to the market.

The lesson is straightforward: granularity creates value when organizations have the information, the structure, and the teams to act on it.

While we've just discussed finding opportunities amid slower growth, it's worth noting that China's consumption may not be as weak as it seems. "People say China has a demand problem. But does it really? The numbers are distorted by pricing and scale especially in hyper-competitive categories," says Jeongmin Seong, an economist and McKinsey Global Institute partner. "Consumers are still spending, often more than ever, but at lower prices. When we look at volumes, the picture is far more dynamic than headline data suggest."

Here's what we mean. China's household consumption share of GDP—about 38 to 40 percent—is low by global standards, and this metric is cited often as evidence of weak domestic demand, especially compared to the US's 70 percent and European economies' 55 to 60 percent. But that share sits atop an economy that's about ten times larger than it was in 2000. In absolute terms, Chinese consumers now account for an enormous portion of global spending, contributing roughly 10 to 15 percent of worldwide consumption growth over the past decade. In other words, Chinese households generate a massive amount of demand.

At the same time, nominal indicators understate the momentum of real consumption. Volumes continue to climb even as prices fall under deflationary pressure and involution. In fact, volumes have been rising across many categories. Auto sales reached about 31.4 million units in 2024, up from 30.1 million, with new-energy vehicles nearing 40 percent of total sales. Per capita coffee consumption rose from nine cups in 2016 to nearly seventeen cups in 2023, amid fierce competition from low-cost local chains. Similar patterns appear in smartphones, appliances, and food services: rising unit volumes alongside declining average prices.

For middle-class households this means drinking more coffee, streaming more content, and purchasing more home goods than they did a year ago—while spending the same or even less. In short, consumers aren't necessarily retreating. They're optimizing: trading down, discovering cheaper substitutes, and extracting more value from each renminbi. With inflation near zero in 2024, nominal spending naturally looks soft even when real consumption remains resilient.

China was never a monolithic market, and today the differences are sharper than ever. Think of the country as many markets moving at different speeds in hundreds of directions. The question is no longer "Is China growing?" but "Where exactly is the growth and how can we capture it?"

Yibing Wu, one of McKinsey's earliest Beijing senior partners now leading investment company Temasek's China division, frames the economy as two systems operating at once: an "old" economy that is contracting and a "new" one that keeps re-forming. "GDP is an outdated measure," he argues. "You wouldn't index-invest across all of China, because there's a whole bunch of things that don't grow. Every seven years, the country generates a new set of emerging industries. The job is to find them—and execute."

We're spotting pockets of opportunity everywhere. In China, niches are not small; such markets will add billions of RMB in the next cycle. This shift also presents a capability test. Can companies see the market at finer resolution, act on weak signals fast enough, and build systems that make precision repeatable? Doing so will require sharper customer insight, test-and-learn marketing, real-time data loops, and organizational models that empower customer-facing personnel without losing strategic oversight.