China is home to one of the world's biggest luxury markets, and it's starting to make a comeback after the country's 3-year COVID lockdowns

China is home to one of the world's biggest luxury markets, and it's starting to make a comeback after the country's 3-year COVID lockdowns

After a blip in 2022, the Chinese luxury and consumer discretionary goods sectors have been showing early signs of recovery.

In terms of luxury and high-end consumption, "we're seeing quite strong recovery," Bank of America's chief China equity strategist, Winnie Wu, told CNBC on Tuesday. China is an important luxury consumer. In a report released in February 2020, consulting firm Bain & Co. said it expected Chinese consumers to account for almost half — that's 46% — of the global luxury market by 2025, up from around 35% in 2019. But thanks to years of COVID-19 lockdowns, China's personal luxury sales fell by 10% year on year in 2022 to 425 billion yuan, or $5.2 billion, per Nikkei. It marked the end a five-year run of exponential growth, according to a separate Bain & Co. report released on February 7.

Even foot traffic at Chinese malls dropped 30% to 35% in 2022, Nikkei reported in February. However, Wu's comments echoed Bain's positive outlook for China's luxury market. "Luxury consumption will recover as Covid subsides, mall traffic improves, and consumer sentiment rebounds. We expect to see 2021 sales levels sometime between the first and second half of 2023," Weiwei Xing, a Hong Kong-based partner at Bain & Company, said in the consultancy's February report. This cheery forecast for the luxury market does not extend to the rest of the Chinese economy.

China's consumer price index, or CPI — the monthly change in prices paid by consumers — showed bleak data for March.

The index rose by just 0.7% year-on-year, its slowest pace since September 2021 and weaker than the 1.5% growth seen in March 2022, according to data released Tuesday by China's National Bureau of Statistics. The month's CPI growth also missed expectations of the 1% growth projected by analysts polled by Bloomberg. It could be the reason Bank of America's Wu told CNBC that strong recovery across China's consumer sector has not yet been seen. "So far we're seeing mixed signals. Retail sales is not good enough," she said.

Source: https://www.businessinsider.com/china-luxury-market-comeback-pandemic-bofa-2023-4