After a turbulent four years due to the Covid-19 pandemic, it is believed that 2024 marked the beginning of China’s luxury market transitioning toward a normalized post-Covid growth trajectory. The fundamentals of luxury consumption in China remain strong in the long run, although there are uncertainties in the near term regarding the speed of consumer confidence recovery and the growth of luxury shopping overseas. It is expected that most of the trends witnessed in 2024 will continue or amplify, leading to a mid-single-digit growth rate in China’s luxury market in 2025.
The recovery of overseas luxury shopping will continue as cross-border tourism develops. The extent of cross-border tourism recovery in 2025 will primarily depend on the speed of economic recovery and changes in travel and lodging costs. Various travel agencies and organizations project that China’s overseas tourism will fully recover by mid to end 2024, with destinations like Hong Kong and Japan being the top choices. Therefore, in the context of expanding luxury spending outside the mainland in 2025, it is expected that there will be another year of recovery of Chinese overseas luxury consumption. It remains crucial for brands to implement harmonized global pricing strategies to reduce the incentives for consumers to buy outside the mainland.
The total investable assets of China’s high-net-worth individuals (HNWIs) are projected to grow at a double-digit rate, serving as a primary driver of mainland China’s luxury growth. However, these individuals are more likely to allocate a portion of their budget to overseas shopping. In 2024, middle- to high-income consumers displayed more rational and discerning behavior. It may take some time for their sentiment to improve, which could impact volume and blended pricing. The entry-level consumers, who have demonstrated resiliency in 2024 with entry-level items, will remain an important segment for luxury brands. However, their ticket price is lower, and they buy more online.
In the long run, China’s growth is stabilizing at a lower yet still significant rate. Real GDP is projected to grow at 4%–5% in the coming years, creating a substantial incremental market and solidifying China’s position as a powerhouse for luxury growth. In 2024, Chinese luxury consumption is estimated to account for approximately 22%–24% of the world’s total, with mainland China comprising about 16%. By 2030, Chinese luxury consumption is expected to reach 35%–40% of the world’s total, with mainland China reaching 24%–26%, solidifying its position as one of the leading luxury markets globally.
