The luxury goods sector has long been heavily reliant on the Chinese market, which has driven global growth figures, sustained over time. However, this relationship between luxury and the Asian giant may begin to show cracks due to the current political and economic turbulence in relations between Europe and China.
Chinese Protective Measures as a Warning
China has recently implemented a series of protective measures that, rather than directly ‘attacking’ — something that benefits no one in the current scenario — aim to intimidate the main luxury players from the Old Continent. These moves have generated concern in the European luxury industry, which fears becoming the target of hypothetical hostile measures from China against Europe in the near future.
In this context, one wonders to what extent China is interested in attacking the European luxury industry. This sector is absolutely strategic for China’s domestic growth and, obviously, is key from a fiscal perspective. Additionally, penalizing luxury could push high-income Chinese consumers to travel abroad to purchase high-end products — a potential trend that the Asian giant cannot afford.
Cultural Shift in China Toward a ‘Mature’ Concept of Luxury
In parallel with the political-economic tensions, interesting changes are taking place in the perception of luxury among middle-high and high-income Chinese citizens.
In general, cultural changes tend to be slow, with effects that are barely noticeable in the short term. However, in China, the situation is different, as they are susceptible to the impact of government-promoted measures, which primarily respond to economic interests.
In this regard, the Chinese government has decided to combat ‘ostentatious luxury’ by promoting values linked to ‘quiet luxury,’ a more Western and mature perspective of interpreting and experiencing the world’s most exclusive products and services.
Some experts suggest that this trend has affected Chinese consumers — whose understanding of luxury has improved over recent years — shifting them toward the acquisition of ‘hard luxury,’ that is, luxury goods whose value proposition remains more stable over time. Simultaneously, the political-economic uncertainty has impacted the aspirational luxury consumer, dampening their impulsive consumption behavior.
The Political-Economic Tensions Are Taking a Toll
The political-economic tensions between Europe and China show no signs of easing and have already taken a toll on the impressive growth figures of the luxury industry. Nevertheless, the sector encompassing the world’s most exclusive products and services is so strategically relevant to both parties that they cannot afford the consequences of escalating the conflict.