Shares of global luxury goods conglomerates, which rely heavily on Chinese buyers, rose on Tuesday after Beijing further eased some of the Covid restrictions in place for the past three years, raising hopes of a full reopening soon.
Hina will stop requiring travelers to quarantine starting Jan. 8, the National Health Commission said Monday, in a key step toward easing restrictions at its borders, which have largely been closed since 2020.
News of the easing buoyed global equity markets, with luxury stocks in particular benefiting.
Shares of LVMH, the world’s largest luxury group and Europe’s number one by market capitalization, rose 2 percent, while Cartier owner Richemont rose 2.4 percent.
China, which is gradually moving away from a strict zero-Covid policy that has battered its economy, kept consumers indoors and sparked a wave of public discontent, accounts for 21 percent of the $350 billion global luxury goods market after North America and Europe euros out.
But for years prior to the current slowdown, it was the fastest-growing region, with young, urban, middle-class professionals in cities across China spending over €10,000 on Hermes Birkin handbags and €1,000 on Gucci fur-lined loafers.
It is expected to become the industry’s top market by 2025 and already generates about 35 percent of annual sales for Gucci, the star brand of French group Kering, 27 percent for competitor LVMH’s fashion and leather goods division and 26 percent for Hermes.
With Europe facing an energy crisis and the US economy also slowing due to higher interest rates, China expects a recovery next year and the luxury world is hoping to benefit.
According to a recent report by consulting firm McKinsey, sales of non-luxury fashion are expected to grow between 2 and 7 percent in 2023, while sales of luxury items are expected to increase by 9 to 14 percent over the same period.
“China is likely to remain a core market for fashion consumption over the long term, with significant untapped opportunities from a customer base whose sentiment is particularly strong for luxury brands,” it said.
