China’s luxury market contracted ten per cent in 2022. This snaps a five-year streak of high growth.

China’s zero-Covid policy and a slowing economy hit spending. The luxury market grew 42 per cent annually between 2019 and 2021 but its fortunes changed in 2022, after China doubled down on stamping out Covid with city-wide lockdowns and a regulatory crackdown hit the property sector and fuelled unemployment.

All luxury categories were affected to varying degrees during the year. While categories with high online penetration, such as luxury beauty, suffered single-digit declines, the watch market fell the most, with sales dropping 20 per cent to 25 per cent from 2021.Fashion and lifestyle experienced a decline of 15 per cent to 20 per cent while sales of jewellery and leather goods contracted ten per cent to 15 per cent.

But China’s decision to dismantle the zero-Covid policy in early December 2022 is likely to bring back growth this year as mall traffic improves and consumer sentiment rebounds. So 2021 sales levels may be seen sometime between the first half and the second half of 2023. While optimism abounds, there are also risks.

Brands need to resolve pricing gaps between China and Europe before international travel resumes.