Dairy Products China Monthly Report

Welcome to the March issue of Dairy Products China News.

The global economy faces mounting pressure amid complex geopolitical tensions and trade frictions. The impact of U.S. tariff hikes on Chinese goods has begun to materialize, with China's export cargo volume to the U.S. declining YoY in Q1, while cross-border e-commerce and intermediate goods trade face disruptions. This month, the U.S. escalated its trade tactics, including initiating hearings on "Chinese vessel port fees" and acquiring greater control over the Panama Canal. These measures aim to target China's shipbuilding industry while curbing China's global freight operations and limiting port access for Chinese-made vessels. Despite these challenges, China's economy has demonstrated resilience, with Q1 GDP projected to grow by 5.2% year-on-year. Domestic consumption remains a key driver, as total retail sales of consumer goods rose 4%, supported by a 10.9% surge in durable goods consumption driven by appliance trade-in programs. Central policies have prioritized boosting consumption through measures such as raising household incomes, expanding subsidy coverage, and optimizing tax structures to unlock consumption potential.

In Q1, the Consumer Price Index (CPI) remained flat, while the Producer Price Index (PPI) fell by 2.1% year-on-year, reflecting weak end-user demand and pressure on industrial goods prices. Consumption exhibited structural divergence: service consumption growth (4.9%) outpaced goods consumption (3.9%), with younger and middle-income demographics fueling demand for personalized and premiumized products, such as premium dairy, functional foods, and smart home devices. However, low-income groups remain constrained by slower income growth and employment pressures, while corporate “revenue growth without profit gains” further undermines consumer confidence.

Amid external supply chain risks, Chinese enterprises are accelerating technology-driven transformation. For instance, Junlebao Dairy has enhanced competitiveness through integrated supply chain management, while beverage chain Mixue leverages global procurement networks to expand into Southeast Asian markets.