No Chinese luxury revival? Growth halves to 4-5%

Bernstein has thrown cold water on hopes that China will quickly revive global luxury demand. In a new report, the research house says the expected U-shaped recovery “looks much more like an L,” with a prolonged economic slowdown, weak consumer confidence and pressure on household wealth keeping growth subdued.

The new shape of Chinese luxury demand

Chinese consumers are not walking away from luxury, but they are spending differently. Falling property prices and youth unemployment are squeezing perceived wealth and confidence, so people are trading down rather than abandoning the category.

That distinction matters. Trading down preserves the category habit but shifts which products and price points actually win.

Why this rewrites global growth

Bernstein notes that Chinese consumers account for around 15% to the high-30% range of consumption for some covered companies. Historically, luxury grew close to 8% annually in the three decades leading up to 2019, with roughly 50% to two-thirds of that growth coming from Chinese shoppers, according to the report.

Strip that demand away and the maths changes. Bernstein’s global luxury goods analyst Luca Solca says growth without a Chinese revival would be roughly half that rate—closer to 4% or 5% than to 7% or 8%. That is not a blip; it is a lower-growth regime.

What to do now

The report argues that waiting for the macro environment to improve is not a strategy. Brands need to address affordability and perceived value for money, and revisit pricing, product mix and offerings before buyers form new expectations.

• Offer more accessible entry-level products that keep the brand’s codes.
• Strengthen perceived value for money without slashing prices.
• Rebalance the pricing architecture so the first rung feels safe.

From a consumer psychology lens, this is a shift in perceived affordability, not lost desire. When household wealth falls, luxury purchases feel riskier. Buyers stay in the category but choose more accessible products that deliver status at a safer price.

The challenge is classic: Chinese consumers may demand more value, but luxury brands cannot afford to look cheap. The winning move is to make the first rung easier to reach while keeping the top rung aspirational.

The pressure is structural

Exports remain one of the few supports for China’s economy, reducing pressure on policymakers to shift toward a consumption-led model. Bernstein expects only incremental and possibly temporary stimulus measures unless economic conditions deteriorate further. The report also warns that artificial intelligence and robotics could add pressure on salaries and employment, particularly among white-collar workers.

“Waiting for the macroeconomic setting to improve is not a strategy,” the report says. For marketers, the practical lesson is to separate price from value: a lower entry point can widen the top of the funnel, while a clearer value story protects the premium.

Source: ETBrandEquity.com