Nanjing's uban skyline morning view in East China's Jiangsu Province File photo: VCG

China's retail sales rose from 39.1 trillion yuan ($5.5 trillion) in 2020 to 48.3 trillion yuan in 2024, according to official data. This year, the figure is expected to surpass 50 trillion yuan. Such a scale firmly ranks among the world's top ranks, underscoring the resilience and prospects of China's consumer market.

Meanwhile, online retail sales have ranked first in the world for 12 consecutive years, highlighting the advantages of China's integration of the digital economy with consumption. Whether in sales of products such as cars and electronics, or services consumption in segments, the Chinese market grows steadily, offering foreign enterprises vast demand potential.

For a long time, China's main advantage in attracting foreign investment lies in its complete industrial chain and efficient manufacturing system. However, the realities during the 14th Five-Year Plan (2021-25) period showed that foreign investors no longer view China merely as a "manufacturing base," but increasingly value its vast domestic consumer market and its technological innovation-driven development. 

The quality of foreign investment has expanded, with cumulative foreign capital absorbed during the 14th Five-Year Plan (2021-25) period exceeding the target of $700 billion, according to the Xinhua News Agency. More importantly, the "Invest in China" brand continues to shine, and the structure of foreign investment is being continuously optimized. Some foreign media outlets' "capital flight" hype has proven groundless.

Foreign companies are increasingly investing in China to capitalize on the country's consumption upgrade opportunities. This trend is evident across various industries. From automobiles and luxury goods to everyday home appliances and food and beverages, international companies are making China a strategic priority for new products. With the rapid growth of China's digital economy and innovative sectors, foreign enterprises are finding greater growth opportunities in the market.

This shift is reflected in the investment structure. During the 14th Five-Year Plan (2021-25) period, China's actual foreign investment utilization has become more diversified across industries and regions. Services and high-end manufacturing have emerged as key focuses of foreign capital inflows, reflecting alignment with China's consumption upgrading. Foreign enterprises are not only expanding along the coastal regions but also increasing investment in the emerging consumer markets of central and western China.

The appeal of China's consumer market compels foreign companies to gain a deeper understanding of Chinese consumer preferences and trends. Chinese consumers are increasingly diverse and digital-savvy. Product localization, enhanced services experiences and online-offline integration have become key to success for foreign enterprises in China.

China's consumer market still has enormous growth potential. As the middle-income group continues to expand, new trends such as green consumption, smart consumption, and health-oriented consumption will drive demand upgrades. As China expands its high-level opening-up and provides a favorable business environment, more multinational companies are expected to expand their presence in the Chinese market, prompting investment in supply chains and research and development centers.

The future logic of China's appeal to foreign investment will increasingly rest on the magnetic effect of its vast domestic market. The consumption dividend is not just a short-term growth driver, but a long-term engine driving foreign capital to integrate more deeply into China's economy.

In response to the prospects of consumption upgrading and innovation-driven growth in China, the consumption market — valued at 50 trillion yuan annually — is expected to further expand and create more opportunities for foreign companies. Foreign companies planning to increase their investments, recognizing the trend of China's consumption upgrading, are expected to fully capitalize on the dividend of the expanding market.
 
The author is a professor at the School of Economics of Peking University. bizopinion@globaltimes.com.cn