China Luxury: Green shoots or a structural shift?

On-the-ground observations from a tour of China's luxury market

After four days of meetings with luxury brand executives, mall operators, watch and jewelry distributors, marketing and consulting firms, and private equity investors focused on the luxury and consumer sectors, a theme emerged: the market is not broken, but it is being fundamentally reordered. The much‑debated “recovery” is proving uneven, and that pattern is itself instructive.

The top holds. The middle struggles.

At the apex of the market, the picture appears surprisingly resilient. Within the high-net-worth segment, our research indicates spending remains comparatively robust: leading maisons such as Dior and Chanel have reported continued growth in recent quarters, helped by new creative directions and fresh collections that have reignited desire among core clients, according to our conversations. Louis Vuitton continues to grow, albeit more modestly, while Richemont is benefiting from recovering watch and jewelry demand. What unites these names is clear brand identity and genuine pricing power (supported by their disciplined scarcity), the two qualities that appear increasingly important in the current environment.

Mid-tier is a different story. Affordable and aspirational luxury brands, already weakened by post-COVID demand normalization, are now caught in a pincer: the ultra-high-end extending its reach downward, and domestic brands pressing upward. Many mid‑tier brands that over‑expanded into lower‑tier cities are now in retreat, closing stores and ceding physical presence just as competition for mind share intensifies.

A consumer base in transformation and a longer road to recovery

Chinese luxury consumers are not simply spending less; they are reallocating their wallets. There are indications of a shift away from logo‑heavy products toward experiences, wellness, and performance‑oriented categories, which may prove more structural than cyclical. Outdoor and sports brands such as Arc’teryx, Salomon (Amer Sports, controlled by Anta), and On Running appear to be capturing a growing share of discretionary spending that might previously have flowed to European leather goods and ready‑to‑wear. This is a cohort that appears more sophisticated, more selective, and less deferential to Western heritage than a decade ago.

Geographic divergence adds a further layer of nuance. Among China's tier-1 cities, Beijing feels genuinely quiet: the government's sustained anti-corruption and frugality campaigns have taken a visible toll: private clubs are closing, and the French department store chain Galeries Lafayette announced it will shutter its Beijing flagship at the end of this month. The luxury markets in Shanghai, Shenzhen, and Hong Kong, which have seen a substantial influx of mainland Chinese wealth over the past three years, however, present much livelier luxury streetscapes.

Property could be the key swing factor. Stabilization signs in tier‑1 housing markets have raised hopes that luxury spending will gradually firm. But a broader, nationwide recovery may take longer. Tier‑2 and below cities, which collectively accounted for more than half of China’s luxury spending before COVID, remain under pressure after years of overbuilding and declining resale prices, leaving aspirational consumers feeling less wealthy and more cautious.

Local brands: no heritage, but a narrative

A notable takeaway from this trip is the apparent momentum building behind domestic Chinese brands. Laopu Gold, a jeweler known for modern interpretations of traditional gold craftsmanship, appears on track, by some external estimates, to surpass (if not already) Richemont’s jewelry revenues in China, marking a symbolic shift in a category once dominated by Western houses. In leather goods and apparel, brands such as Songmont and Icicle (often dubbed “China’s Loro Piana”) also seem to be gaining ground. Individually, they remain small, but collectively there are indications that they are taking share from Western mid‑tier players, supported by supply‑chain agility, faster product cycles, and deeply digital‑native marketing.

Category dynamics are uneven. Watches remain largely a Western preserve, anchored by Swiss incumbents and high technical barriers, while beauty and cosmetics seem to be areas where Chinese brands have made the most progress. Across categories, local players tend to compete less on “heritage” and more on narrative: rooted in local culture, contemporary design, and a sharp sense of price‑value. As one executive put it plainly: "They [local players] have no heritage, but they have narratives." The open question is how quickly those narratives can travel internationally – an achievement that could further strengthen these brands' pricing power and positioning at home.

Where we see opportunity

Amid this reshuffling, we believe there may be opportunities in infrastructure‑like platforms that sit at the intersection of top‑tier demand and rising local brands. MixC Lifestyle Services, the shopping‑mall operator backed by China Resources, is one example. Headquartered in Shenzhen with deep roots in southern China, MixC offers exposure to some of the country’s most financially resilient consumers. Its willingness to allocate prime mall space to fast‑rising domestic labels without diluting its appeal to ultra‑luxury tenants, positions it well for an environment in which both global maisons and local champions matter.

Among Western mid-tier names, we believe Tapestry/Coach and Ralph Lauren stand out as notable exceptions: both appear to benefit from strong local teams, operating models that are tightly integrated with Chinese digital platforms and retail formats, and brand propositions that still resonate with a younger, value‑conscious but aspirational consumer.

Our conviction

Most Western investors remain skeptical of a broad luxury recovery in China. We share that caution at the macro level. But the more important insight from this trip is that a structural reordering is already underway: one that rewards brand clarity, local intelligence, and the willingness to evolve product, pricing, and channel strategy. In this environment, we believe investors need to differentiate between brands simply waiting for a cyclical rebound and those actively aligning themselves with where the Chinese consumer is going, not where they have been.