In 2018, Chinese consumers at home and abroad spent 770 billion yuan ($115 billion) on luxury items, or a third of total global spending, with each luxury-consuming household spending an average of 80,000 yuan per year, according to the China Luxury Report 2019 recently issued by McKinsey & Company.
The report indicated that Chinese consumers’ expenditure is set to almost double to 1.2 trillion yuan by 2025.
China delivered more than half the global growth in luxury spending between 2012 and 2018, said the report, indicating that the country is expected to fulfill 65 percent of the world’s additional spending heading into 2025.
According to the report, the growth is driven by an explosion of upper-middle-class households. The population of this group will rise at a compound annual growth rate of 28 percent from 2018 to 2025, taking the total number of people in China earning between 17,450 yuan and 26,180 yuan per month per household to 350 million.
The majority of this group, about 70 percent, will do their luxury spending overseas, a result of an increasing affinity for outbound travel and the price differential resulting from China’s import tax regime and brand pricing policies.
The report also claimed that China’s post-’80s/’90s generations are the driving forces of the country’s luxury appetite. They accounted for 56 percent and 23 percent of the total spending on luxury by Chinese consumers in 2018 respectively.
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