A year ago, shoppers in Shanghai visiting The Louis, a massive Louis Vuitton emporium shaped like an ocean liner, were stocking up on pricey luggage, raising hopes that China’s luxury market was finally rebounding.
The striking homage to the brand is still a tourist attraction, but the recovery ship may have sailed. There are growing concerns that the nascent upturn in Chinese top-end spending has stalled, leaving big bling more dependent on America for growth this year—and ever more vulnerable to any downturn in the US stock market.
In late 2025, it looked like China was at last turning a corner. Between the easing of a trade war with the US and enthusiasm for AI supporting spending, LVMH, Burberry and Cartier-owner Richemont all indicated that a long slump, which worsened in 2024 after the collapse of China’s real estate sector, was past its nadir.
Spending in 2026 started off well, but lately confidence has cracked. The MSCI China Index is down about 10% this year. More troubling for the luxury houses are government measures targeting the wealthy who have been propping up the luxe industry. Bloomberg News reported last month that sales at the 25 biggest luxury labels in China dropped by more than 10% in July, deepening a slump seen in June.
Bernstein analyst Luca Solca last week trimmed his estimate for global industry sales growth this year to 5.1%, from 5.5% previously, on the possibility of “another Chinese false dawn.” The cut came after a sample of luxury shopping mall sales data in mainland China pointed to a sharp deceleration in June and July.
China’s ongoing economic malaise has strained the coffers of its national and regional authorities. To replenish them, Beijing began this year to tighten controls on capital flowing out of the country and stepped up efforts to reclaim tax revenues going back decades—moves that disproportionately hit the affluent consumers that luxury brands rely on most.
At the same time, Chinese middle-class consumers hit by a broad economic downturn have been downgrading their shopping budgets. No longer able to spend tens of thousands of yuan on designer handbags, they have turned to more affordable indulgences such as luxury skincare. That’s why the likes of L’Oréal and Estée Lauder are enjoying a revival in the country even as many fashion labels struggle.
For big luxury houses, the wobble further delays the moment when Chinese consumers return to any semblance of the force they were for the decade between 2010 and 2020, when they accounted for as much as 90% of growth in the industry. It also makes designers even more dependent on the US.
Americans now represent the largest share of global luxury spending, according to Jelena Sokolova, analyst at Morningstar, and this is set to remain the case through 2035, according to her estimates.
Emboldened by AI riches and broader stock market gains, which tend to be well correlated with top-end spending, Americans have been leading the luxury charge. But the newly minted appear to be shelling out more on watches and jewellery than handbags and designer clothes.
The largest risk, though, is any brake on US stock markets, either from a bond rout turning into an equity-market correction or an AI bubble bursting. Investors are already nervous. Shares in LVMH fell last week to their lowest since 2020. While that level could be attractive to long-term investors, comfort on both the Chinese and US luxury markets would be needed.
In the case of China, reassurance is in short supply. LVMH noted in July that its market remained volatile, with spending clustered around key holidays and shopping events.
It may be that recent months have simply coincided with a period lacking in inspiration for Chinese consumers. The 618 online shopping festival that ended in mid-June was lacklustre for luxury. The National Day Golden Week early next month and Singles Day retail event that follows will be the next big tests of demand.
Help from the authorities can’t be ruled out, but looks unlikely. While Beijing says reviving household spending is a strategic priority, it has not undertaken the long-term work of achieving that goal.
A slew of disappointing economic data in recent months has Beijing scrambling to increase infrastructure investment and boost confidence in the property market, but these are incremental measures that will not move the needle on consumption.
Either way, when luxury cratered three years ago after the post-covid ‘revenge spending’ trend, the freeze was severe because both the US and China weakened at the same time. Companies and investors will want to avoid a repeat of that unfortunate market combination. ©Bloomberg
The authors are Bloomberg Opinion columnists.