Prospects for the luxury industry in 2016. The case of China

2015 has been a year of ups and downs for the economy and the luxury sector in China. Expect 2016  start on the same line.

Abel Amón. 30/12/2015

In the last two years it has been producing a slowdown in luxury sector in China. Besides of the less growth experienced by the now world’s second largest economy, there are intrinsic factors to the luxury sector, that explain this slowdown. The devaluation of the Chinese currency, the yuan, has helped reduce the purchasing power of the Chinese to buy imported goods or travel abroad to buy them there. In 2016 they are expected both a continuation of the cooling of the Chinese economy, and subsequently. The devaluation of its currency.

Burberry scarfs
Burberry scarves

In such us current situation, that luxury brands like Louis Vuitton and Burberry are facing some difficulties in China, which was the luxury market fastest growing in recent years. In tandem with the slowing economy, also influenced the anti-corruption policy of the government which have affected both the demand for bags and coats as the alcohol of the highest segment. LVMH was the first supplier of deluxe important to recognize that the collapse of the stock market in China during the summer had affected sales, particularly in its flagship store of Louis Vuitton.

Louis Vuitton A/W 2015
Louis Vuitton A/W 2015

Chinese tourists based on these economic data are more likely to travel to nearby destinations and less overvalued than the dollar or the Euro. It is expected a rise of Chinese tourism to places like South Korea, Japan and Thailand. It is noteworthy that the Chinese tourism abroad has increased and will continue to do, for reasons such as those explained in our article on these pages. As indicana in that article, it is essential to attract Asian tourism to Spain, it is shown that Chinese tourists consuming more luxury goods than those from western countries.

chinese tuourists

It has also been a drastic reduction in the visits of Chinese to Hong Kong and Macao, linked to the persecution of the underground economy and the aforementioned anti-corruption campaigns Finally note that not only luxury multinationals established in China suffer but the manufacturers themselves Chinese market. highlighted in one of its recent editions the fall in purchases of Tibetan mastiffs are seen there as a sign of ostentation. The jade industry has also experienced a considerable drop in both sales and prices. Hundreds of local companies in the luxury sector have recently broken.

The jade
The jade industry has also experienced a considerable drop in both sales and prices.

The slowdown in economic growth and household incomes of China put on alert ahead to 2016 vendors in developed countries for luxury goods such as perfumes, golf clubs, or works of art. Our colleague Marcos Mosteiro recently analyzed the change in orientation of multinationals such as LVMH in China, because of the recent closure of three of its stores there, while the auction house Christie’s in Hong Kong ingrso only HK $ 508 million ($ 66 million) in November, well below below HK $ 935 He invoiced in 2013.

Neverfull by LV original
Neverfull by LV original

It is expected that the Chinese government adopted expansionary monetary or fiscal stimulus measures. Although they may have some effect in the very short term, we are not in favor of such measures, especially in a situation like the current credit and state expending bubble. The best would be further liberalization of the economy, less state interference in business and make easier foreign investment. An important recognition for China and its currency has been  the inclusion of the yuan as the currency basket of the IMF. This good news should be reinforced by the full convertibility of the Yuan, something will happen only when the Chinese government , among other things liberalized the banking sector.

My Burberry
My Burberry

The Chinese economy will continue cooling.
Estimates vary, but the consensus is that Chinese consumers in 2015 accounted for more than a quarter of the global luxury consumption. But after the great stock market crash and half year after the Chinese government devalued the yuan in August 2015, foreign purchasing power of China has taken a turn for the worse. Added to that, the Chinese economy will continue cooling. A separate chapter is the delicate environmental situation in cities like Beijing itself. China has given its commitment to the agenda to combat climate change signed in Paris, and this commitment will also imply un additional cost.


Disclosure: The medium is not responsible for the views expressed in the article. The text was written freely expressing ideas , without receiving any compensation. The author has no business relationship with any of the companies whose shares are listed in this article.


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