The Chinese luxury market could be the world’s Number One
Industry analysts predict that China  will soon be the world’s largest luxury market, overtaking the United States.
The Chinese luxury market could be the world’s Number One
The Economics of Geography

The Chinese luxury market could be the world’s Number One

Photo: AFP/Nicolas Asfouri
Patrícia Fischer 20/03/2023 16:00

Industry analysts predict that China  will soon be the world’s largest luxury market, overtaking the United States.

While the luxury markets of Europe and the United States have suffered from the pandemic mainly due to the absence of rich Chinese tourists, China’s wealthy citizens have contributed large sums to global luxury spending. By 2020, China had grown into the second largest luxury market in the world, valued at USD 44 billion. The US luxury market was estimated at USD 55 billion in the same year.

The segment is already quite significant and, according to international consultants Bain & Company, the Asian economy could become the world’s largest luxury market by 2025 at current growth rates. As Bain & Company stated, China’s luxury market grew at roughly 48 percent in 2020. This growth was fostered by the introduction of travel restrictions due to Covid-19, as China’s wealthy spent their money in their home country instead of the traditional ”fashion capitals”. As a result, China’s share of the global luxury market increased to 20 percent in 2020 and is expected to reach 50 percent by 2025.
Photo: iStock

Considering the significant increase in disposable incomes, the expansion of the nouveau riche and the tradition of giving gifts that is embedded in Chinese culture, the massive boom in the Chinese luxury sector in recent years is anything but surprising. In addition, a number of international players have appeared in the domestic market. Luxury brands that have faced challenges in other parts of the world tend to find their accounts in China.

However, it is interesting to note that there is a significant price difference between luxury goods available in China and those on the international market. Consulting company Labbrand has taken a luxury brand bag as an example: if you buy a given model in China, you may have to pay up to 80 percent more than if you are buying it in Europe or in North America. This huge difference comes from the high Chinese customs tariffs on luxury goods. The analysis also reveals that even if tariffs were lower, the customers’ high expectations and willingness to buy would not make the product much cheaper.

Photo: AFP
The author is an economic journalist

This article was originally published in our Hungarian-language magazine Eurázsia in 2022.

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