China’s new year splurge could give luxury a fresh start

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The Chinese lunar new year gives every shopper a reason to splurge.

During the holiday, wearing new clothes — especially red ones — symbolises getting a fresh start to an auspicious year and ushering in good luck. The global economy could use some of the same. On Monday, strong spending data boosted Chinese stocks as trading resumed after the week-long lunar new year break. That is an encouraging sign.

Tourism revenues in China during the eight-day holiday surged 47.3 per cent from a year earlier, official data showed on Sunday. When it came to entertainment, spending hit a record high with box office revenue surpassing Rmb8bn ($1.1bn) during the break, when consumer spending has historically been high.

Retail sales during this holiday can offer a leading indicator of the health of the Chinese economy and consumer sentiment for the year to come. Before the pandemic, Chinese shoppers spent $150bn during the week-long break in 2019, according to official data. This figure has risen every year for more than a decade.

Given that Chinese shoppers accounted for more than a third of the world’s luxury goods consumption before the pandemic, this holiday is also an important time for Europe’s high-end groups. That explains the elaborate marketing campaigns from companies such as Kering this year. The visits of large groups of free-spending Chinese tourists to Europe have not yet resumed, making sales at home in China that much more important.

Of course, the expected rebound in post-pandemic spending following China’s reopening of its economy and borders never materialised. Producer prices have been on a downward trend through last year, as consumer demand weakened.

But another local consumer trend — the growing demand for premium products — is encouraging for luxury goods and service providers. Fashion, lifestyle and jewellery segments recorded their strongest growth rates last year, during which the Chinese luxury market grew by more than a tenth, according to Bain.

By 2030, Chinese luxury consumption should reach as much as 40 per cent of the world’s total. Premium hotel and travel services are also in growing demand. Shares of Jinjiang Hotel, which operates more than 1,500 establishments, rose 7 per cent on Monday.

Even as the outlook remains uncertain amid a faltering real estate sector, Chinese retail sales are expected to grow more than 5 per cent this year. The Year of the Dragon is known locally to be the luckiest Chinese zodiac animal. It may also bring better luck for high-end brands.