# Expert Interview with BCG's Liao Tianshu: China's Market Undergoing Profound Transformation from Functional Consumption to Pleasure-Seeking Consumption

Southern Finance 21st Century Economic Report Reporter Zheng Qingtian, Intern Xie Jianling Beijing Report

From March 22 to 23, the China Development High-Level Forum 2026 Annual Conference was held in Beijing with the theme “China in the 14th Five-Year Plan: High-Quality Development and Co-Creating New Opportunities.” As the first major international forum after the National Two Sessions focusing on the economy, this year’s conference attracted much attention and has become an important window for observing China’s future economic policies and new growth drivers.

Focusing on current hot topics in China’s economy, Boston Consulting Group (BCG) China Chairman Liao Tianshu gave an exclusive interview to 21st Century Business Herald reporters at the forum. She pointed out that China’s consumer market is undergoing a profound shift from “functional consumption” to “pleasure-oriented consumption,” and new forces represented by the silver economy and artificial intelligence (AI) intelligent agents are reshaping the underlying logic of economic growth.

Liao Tianshu noted that the Chinese consumer market is showing clear signs of migration and iteration. Consumers remain frugal with basic necessities, but are more willing to spend generously on categories that improve quality of life and emotional satisfaction. Phenomena such as trendy toys, domestic animation movies, sold-out concerts, and sports events confirm the shift from “functional consumption” to “pleasure-oriented consumption.” Meanwhile, demand for experiential consumption like travel and outdoor sports remains strong, indicating consumers increasingly pursue emotional fulfillment and life experiences.

With demographic changes, the silver economy is highly anticipated. Liao believes that China’s silver population holds huge potential, but companies should beware of one-size-fits-all strategies. She explained that “the baby boomer generation” (the “first silver”) is more pragmatic and peaceful, while “the emerging silver” (Generation X) has higher digital literacy, greater wealth accumulation, and more personalized needs. The characteristics of these two groups—similar at the core but different on the surface—are leading to market segmentation.

In her view, the recent surge in eldercare robots marks an important breakthrough point for “technology + eldercare.” Technologies such as smart eldercare platforms, health monitoring devices, and eldercare robots can alleviate labor shortages and meet the dual needs of the silver population for independent living and emotional companionship, promoting the development of intelligent and efficient eldercare services.

Regarding the government work report’s first mention of “creating new forms of intelligent economy,” Liao interprets this as a clear signal: AI is evolving from a single technological tool into a core infrastructure supporting economic restructuring. “AI is shifting from a mere efficiency tool to a systemic capability involved in production, operation, and decision-making processes.”

She predicts that the next wave of AI will revolve around intelligent agent systems. Unlike previous logic optimization or creative generation, AI agents can integrate entire workflows, utilize corporate institutional knowledge to form judgment, undertake tedious tasks, and open new avenues for enterprise value growth. In practical terms, sectors like consumer goods, financial services, and healthcare—characterized by dense data and standardized processes—will benefit first, achieving efficiency revolutions in customer service, supply chains, and production scheduling through AI.

Changes in Consumer Logic: From Functional Consumption to Pleasure Economy

“21st Century”: The 2026 government work report places expanding domestic demand at the top of the annual agenda, proposing “driving growth through consumption,” emphasizing service and new consumption. How do you interpret the underlying logic shift behind this policy orientation? In the current environment, which consumer sectors or companies have already demonstrated sustainable growth momentum?

Liao Tianshu: This year’s government work report further reflects that consumption policies are shifting from short-term stimulus to establishing long-term mechanisms, aiming to make consumption a sustainable driver of endogenous growth. Previously, policies relied more on temporary promotions and subsidies, but now there’s greater emphasis on service and new consumption forms, upgrading structures and building capacity for long-term growth.

BCG has long monitored consumption trends and market changes. Under the new circumstances, the differentiation among categories is becoming more pronounced: on one hand, household improvement consumption continues to grow—appliances, furniture, daily necessities, and communication devices are maintaining rapid growth driven by policy support and consumption upgrades; on the other hand, health and quality consumption are heating up—propelled by wealth effects and health awareness, markets like jewelry, health drinks, and medical aesthetics are seeing significant growth.

Beyond traditional categories, new consumption drivers are emerging, characterized by scene-based experiences, personalized needs, and lifestyle upgrades: notably, the rise of the silver economy. This demographic has stable income, ample leisure time, and “high income and savings.” Short-distance travel has high repurchase rates, and health supplements and foods meeting health needs have growth potential. Additionally, emotional and pleasure-oriented consumption remains hot: mid-to-high-end outdoor activities, travel, and entertainment experiences are growing rapidly, reflecting consumers’ increasing focus on life experiences and emotional satisfaction.

“21st Century”: Since last year, phenomena like “Su-cho” (Scottish football), “Nezha 2” breaking box office records, and IPs like “Labu Labu” have attracted attention. Do these hits reflect a deep shift in China’s consumer market from “functional consumption” to “emotional” and “pleasure-oriented” consumption? How do you view the role of “emotional consumption” in expanding domestic demand’s depth and breadth?

Liao Tianshu: Currently, China’s consumer market is clearly migrating and iterating. Consumers remain frugal with basic necessities but are more willing to spend generously on categories that enhance quality and emotional value. Phenomena like trendy toys, domestic animation movies, sold-out concerts, and sports events confirm this shift from “functional” to “pleasure-oriented” consumption. Meanwhile, demand for experiential consumption such as travel and outdoor sports remains strong, indicating consumers’ increasing pursuit of emotional fulfillment and life experiences.

From a macro perspective, this type of consumption plays a vital role in expanding domestic demand: on one hand, experience-based consumption creates new scenes and increases consumption frequency, driving overall growth; on the other hand, it spurs enterprises to innovate in products and services, fostering a richer, more diverse consumption ecosystem.

“21st Century”: The rise of domestic brands has become another main theme in recent years’ consumption market. Do you see this trend as a short-term flow-driven phenomenon, or a long-term victory based on improved supply chain maturity and “value-for-money”? Does this mean China is replicating the “domestic substitution” path seen in home appliances and mobile phones? In the process of internationalization, what key leaps do domestic brands still face—moving from manufacturing to branding and standards?

Liao Tianshu: In recent years, under complex and rapidly changing market conditions, more Chinese local consumer brands have emerged successfully. According to BCG research, three capabilities have been crucial: first, product innovation—precise scene and target group positioning to meet niche needs, upgrading quality and emotional appeal; second, channel deployment—focusing on key channels, achieving channel synergy, and improving market penetration; third, agile organization—efficient cross-functional teams and digital empowerment enabling rapid response to market changes.

Looking ahead, domestic companies are continuously improving in product innovation, supply chain efficiency, and understanding local consumer needs, gradually building competitive barriers and strengthening “substitution” capabilities. However, compared to home appliance and mobile phone industries, consumer goods rely more heavily on brand trust and long-term reputation, so this process is more about competitive restructuring than simple replacement.

In terms of internationalization, Chinese brands are actively exploring global paths. Going abroad isn’t only about “asset-heavy” direct stores but also includes phased, differentiated approaches—such as “light assets” models for overseas markets, leveraging cross-border channels or agents to introduce proven domestic products. In markets like Southeast Asia and Africa, which are still dominated by traditional retail, companies can export standardized management systems, digital tools, and supply chain capabilities to upgrade local retailers, creating differentiated competitive advantages. Success abroad depends less on capital or technology and more on deep understanding of local consumer cultures, rather than copying domestic models wholesale.

New Insights into the Silver Economy: Technology Breakthroughs and Intergenerational Differentiation

“21st Century”: With demographic shifts, the silver economy is rapidly expanding. The government work report also emphasizes eldercare industry development. How do you assess the growth potential of the silver economy—from health management and eldercare services to age-friendly products and cultural tourism? How should companies understand and meet this group’s consumption needs? Especially with the recent surge in eldercare robots, does this indicate that “technology + eldercare” is becoming a key breakthrough?

Liao Tianshu: From a consumption perspective, China’s silver population shows rapid growth potential, but different generations display distinct consumption characteristics. BCG research indicates that “first silver” (baby boomers, born 1950-1964) tend to be pragmatic and seek long-term companionship; “new silver” (Generation X, born 1965-1979) are more digitally literate, wealthier, and more focused on personalized needs.

Faced with a large and diverse market, a gradual segmentation is emerging. The “bottom layer” of both groups shares similar traits, but their attitudes toward products differ in three main ways, requiring tailored strategies:

• Professional eldercare: Both groups recognize the importance of specialized eldercare, willing to pay premiums for age-appropriate designs. Clear, professional, health-related products like health supplements and home medical devices are key.

• Demand differentiation: Focused on quality of life and self-improvement—such as leisure footwear, skincare, and travel. Due to differing priorities between the two groups, these categories need targeted channels to reach segmented silver consumers.

• Rejection of anxiety: Products like housing and daily services that integrate into daily life are favored by mature consumers seeking overall comfort. Their needs are less sensitive to age-specific features and more aligned with experience and emotional connection, similar to younger generations. Market education should emphasize experience and emotional engagement.

Technology is also becoming a crucial breakthrough. Smart eldercare platforms, health monitoring devices, and eldercare robots are improving service efficiency and coverage. Robots in basic care, health monitoring, and companionship help address labor shortages and meet the needs for independent living and emotional support, pushing eldercare toward smarter, more efficient models.

Overall, companies aiming to capitalize on the silver economy should analyze the psychological and consumption differences across age groups, develop precise layered branding strategies, and focus on emotional needs related to self-identity. Moving beyond simple product functions, offering human-centered, emotionally valuable products and services will better integrate with China’s 600 million silver consumers and support sustainable, long-term growth.

Redefining AI’s Role: From “Tool Empowerment” to “Smart Economy”

“21st Century”: The government work report first mentions “building a new form of intelligent economy” and emphasizes expanding “AI+” and promoting the adoption of intelligent terminals and agents. What signals does this send? How is AI’s role in China’s economy shifting—from “tool empowerment” to “smart economy”? Which industries will benefit first from this transformation?

Liao Tianshu: These initiatives indicate that AI is evolving from a single technological tool into a core infrastructure supporting economic transformation and industrial upgrading. By deepening “AI+,” promoting intelligent terminals and agents, and integrating with the real economy, digital infrastructure, and industry ecosystems, AI is moving from a mere efficiency enhancer to a systemic capability involved in production, operation, and decision-making, becoming a key driver of innovation and business model evolution.

Previously, AI applications focused on logic optimization or creative tasks. The next wave will center on intelligent agent systems capable of integrating entire workflows, leveraging enterprise knowledge to make judgments, and handling repetitive or complex tasks—creating new value growth opportunities for enterprises.

In practical sectors, data-rich and process-standardized fields like consumer goods, finance, healthcare, and manufacturing will benefit most, as they have abundant structured data and repetitive processes. AI-driven automation and real-time decision-making will enhance customer service, supply chain management, and production scheduling, significantly boosting efficiency and reducing costs—becoming central to industry upgrading.

“21st Century”: Chinese tech companies are accelerating their overseas expansion in smart terminals, digital products, and related services. How are their internationalization strategies changing? What are your views on current overseas market opportunities and challenges for Chinese tech firms? Especially with geopolitical rules barriers, how should Chinese companies develop sustainable global strategies?

Liao Tianshu: Recently, Chinese tech firms’ globalization paths are shifting from hardware-centric “manufacturing exports” to capabilities encompassing “products + technology + services,” evolving from simple product providers to solution and platform players.

Their advantages include rapid technological iteration, strong supply chain integration, and a robust domestic manufacturing ecosystem with rich digital application scenarios. The accelerating digital transformation in emerging markets creates increased demand for smart devices and digital services, offering new opportunities.

However, geopolitical tensions and trade frictions introduce uncertainties. Companies need to build core capabilities: establishing overseas R&D, optimizing teams to fit local markets, creating or joining ecosystems, and iterating branding and marketing based on local insights. Long-term success depends on understanding local cultures deeply, rather than merely copying domestic models, and ensuring compliance with local laws and regulations—such as content moderation for internet platforms or safety standards for manufacturing—to sustain operations.