The size and growth of the luxury goods and services market is a mark of the level of wealth in a country or region – hence it is a barometer for wealth managers and private banks to follow.

A new report by MDRi, a business insights group of law firm Mishcon de Reya, highlights a market in transition, with Chinese consumers exhibiting sophisticated preferences for experiences, domestic brands, sustainability, and innovation.

Despite the prevailing macroeconomic uncertainty and inconsistent growth across various luxury segments, the overall sentiment for luxury spending remains robust, according to the firm. MDRi, with offices in Hong Kong, Singapore and London, set out its China Luxury Consumer Forecast 2025, presenting an analysis of luxury consumption trends in mainland China and Hong Kong.      

The size and growth of the luxury goods and services market is a mark of the level of wealth in a country or region – hence it is a barometer for wealth managers and private banks to follow. While economic growth has decelerated in China, the country's rise has been accompanied by a rapid expansion of an affluent middle class.

Although European luxury goods' stocks struggle amid a challenging backdrop, the report said 56 per cent of mainland Chinese luxury consumers plan to increase their spending in 2025, compared with 48 per cent in Hong Kong. This divergence is largely influenced by a more pessimistic outlook on Hong Kong's economy, shaped by international monetary policies and geopolitical tensions.

Economic uncertainty continues to loom over Hong Kong, where 12 per cent of luxury consumers intend to reduce their spending next year, compared with 9 per cent in mainland China. This cautious sentiment reflects broader concerns about the region's economic stability.

The survey was conducted between April and May 2024, with a sample size of 1,500 luxury consumers from mainland China and 500 luxury consumers from Hong Kong. All respondents were required to have purchased luxury items and to have spent a minimum of 50,000 in their local currencies on luxury purchases within the past 12 months.

In the mainland, luxury spending is expected to be driven by high-end jewellery, handbags, and travel experiences, with nearly 60 per cent of consumers planning to allocate more of their budgets to luxury travel. In contrast, positive sentiment is less pronounced in Hong Kong, where the luxury market is becoming increasingly polarised, the report shows. Over 10 per cent of consumers in each luxury category in Hong Kong plan to reduce their spending, showing a cautious approach, especially in categories such as handbags (9 per cent) and travel experiences (4 per cent), the firm said.

This report shows why it is important to understand evolving preferences for luxury goods by consumers in both regions, as brands appeal to a rapidly changing market landscape.

"Mainland China is currently experiencing a dynamic shift in [the] luxury market. Recent industry data has unveiled contrasting trends, with certain luxury conglomerates witnessing declines in Asia-Pacific revenues, while others have observed growth in parallel instances,” Simon Tye, CEO of MDRi, said. “The strong consumer demand for luxury watches, handbags, jewellery, and travel experiences positions these categories as key growth drivers for the industry. Brands that make consumer insights the foundation of their product development and go-to-market plans will be best positioned to solidify their leadership in these high-potential luxury segments; and agile brands that continuously monitor and respond to changing consumer preferences will be the ones to dominate these in-demand categories."

The report identifies five key trends shaping the Chinese luxury market in 2025:

1. Luxury lifestyle and experiences
Mainland Chinese consumers are increasingly prioritising lifestyle-driven luxury, with 57 per cent planning to boost spending on wellness, fitness, and luxury travel. Notably, wellness and spa treatments rank among the top items the youngest consumers (aged 21 to 25) in mainland China plan to spend more on in the next 12 months (63 per cent), ranking number two and just slightly below health and fitness activities (64 per cent).

2. Shopping destinations
Mainland China's Tier 1 cities, led by Shanghai, remain dominant luxury shopping hubs, the report reveals. However, Sanya is emerging as a rising destination, with 23 per cent of mainland Chinese luxury shoppers making purchases there in 2024, driven by duty-free policies. Hong Kong remains a luxury shopping destination for Tier 3 city shoppers but it is losing appeal among Tier 1 consumers, who increasingly find comparable luxury experiences closer to home. Hong Kong's attractiveness among lower-city luxury consumers could be partly attributed to the Chinese government's efforts at fostering Hong Kong's tourism in these cities.

3. Preferences for domestic brands
National pride is driving a growing preference for domestic luxury, with 56 per cent of mainland Chinese consumers planning to buy more from Chinese luxury brands in 2025, the firm continued. Millennials, in particular, balance global prestige with domestic pride, driving demand for both French and Chinese brands, especially in watches and fashion. The success and influence of Chinese luxury brands could possibly shape the future direction of the global luxury industry, setting new standards and pushing the boundaries of what luxury means in the years to come.

4. Sustainability and secondhand luxury
Sustainability is now a central value for mainland Chinese consumers, with 85 per cent stating it is important and 42 per cent willing to pay a premium for sustainable luxury products. Younger luxury consumers (aged 21 to 25) are leading the charge in embracing the allure of secondhand premium products, highlighting the rising environmental consciousness. Secondhand luxury is also gaining traction, with 59 per cent of mainland Chinese luxury consumers purchasing pre-owned items in 2024, particularly small leather goods and shoes. Younger consumers view secondhand luxury as a way of expressing individual style rather than just a cost-saving option.

5. Tech and AI in luxury
Mainland Chinese consumers are embracing tech-driven luxury, with 90 per cent willing to pay a premium for innovative products. Artificial intelligence-powered personalisation is seen as a key enabler for tailored customer experiences, though concerns about its impact on exclusivity remain, with 66 per cent expressing reservations about AI-driven mass customisation.

As a result of evolving consumer sophistication and upper-middle-class expansion, Chinese luxury consumers are increasingly globally mobile, technologically advanced, and discerning.. With 42 to 47 per cent of Chinese luxury consumption projected to occur abroad, mainland China's luxury market is setting global trends. Growth will be propelled by domestic brands, sustainability, and the rising influence of younger consumers, the firm continued.

Reflecting on 2024, mainland China showed stronger growth in the luxury sector. Spending in Tier 2 cities surged by 22 per cent, outpacing Tier 1 cities. In Hong Kong, luxury spending rose modestly. Significant growth was seen in high-value items such as jewellery (+64 per cent) and handbags (+66 per cent), highlighting a preference for big-ticket purchases, the firm said.

"The Chinese luxury market is undergoing a profound transformation, largely influenced by the preferences of the younger generation,” Tye said. “This cohort is not only redefining luxury consumption but is also poised to reshape the global luxury industry. Their demand for personalisation, wellness, and sustainability, combined with a strong inclination towards innovative Chinese brands, signals a departure from traditional luxury norms.”