As the year begins, trends in consumer spending in the experience economy are beginning to emerge, and equity analysts are picking stocks they think will be winners. Charlie Chen, head of research at China Construction Bank International Securities, said the consumer staples sector doesn’t seem to have much room to run this year, but there are opportunities in discretionary spending such as food and beverages and service spending. He pointed out that, in line with the government’s goals, service-based sectors are also contributing to employment support, and that local governments may issue more vouchers to promote regional tourism. But overall, consumption is still recovering this year and growth is not driving the country’s gross domestic product (GDP), he said. In 2025, China’s retail sales of goods increased by 4% as of November, while service sales showed a slight increase of 5.4%. Full-year statistics are scheduled to be released on January 19th. Bank of America goes beyond a sectoral approach to compare private businesses and convertible debt in China. “While consumer growth has generally slowed, most large consumer companies continue to enjoy strong net cash positions and cash flow generation,” BofA analysts said in a Jan. 6 note. “Many consumer stocks currently enjoy dividend yields of 4-6%, which could provide some downside protection,” the analysts said. Two of their favorite Chinese consumer stocks are hotel chain operator H World for growth and KFC operator Yum China for yield. Bank of America rates H World’s U.S.-listed shares a “buy” and has a price target of $62. Analysts predict that revenue per available room will turn positive this year with 2% growth, reversing an estimated 2% decline in 2025. In the long term, analysts expect H World to benefit from increased adoption of artificial intelligence, a shift to an asset-light model, and non-traditional hotel monetization opportunities such as technology and membership. As for Yum China, which also operates Pizza Hut in China, BofA has a price target of $56.50 and considers it a buy. “We view YUMC as a high-quality, high-yield stable compounder with visibility that offers greater than 10% EPS growth and low-to-mid 10% total return potential,” the analyst said. China Construction Bank International also named Yum China one of its favorite consumer services stocks this year, citing the company’s “excellent execution ability” and “strong negotiation strength.” Analysts have a price target of $58. Stock analysts believe that China’s trade-in extension policy, announced in late December, remains a source of support. The measure narrows the range of eligible home appliances, while extending purchase subsidies to AI glasses and certain smart home products. “Trade-in programs favor white goods,” HSBC analysts said in a note on Thursday. One of their favorite picks for Chinese consumers is Midea, a Hong Kong-listed consumer electronics company. “We remain positive on Midea in 2026 given its solid profit growth and high quality shareholder returns,” analysts said. “We believe that Midea can maintain stable profit margins and achieve significant revenue growth through price increases and cost reductions through the development of its OBM business in the overseas consumer sector, expansion into the commercial sector, and M&A.” HSBC rates the stock a “buy” and has a price target of HK$109 ($13.98). —CNBC’s Michael Bloom contributed to this report.
