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Perspectives: China’s luxury consumption
618 Plays19 days ago
Tian Lu, CEO of HSBC Qianhai Securities, sits down with Alain Li, President of the French Chamber of Commerce in Hong Kong, to discuss how Chinese consumption has evolved, the rise of local luxury brands, and what the future holds for the luxury market in China. This episode was recorded on the sidelines of HSBC’s 12th Annual China Conference in Shenzhen on 1 September 2025. Disclaimer: Views of external guest speakers do not represent those of HSBC.
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Transcript
Introduction to HSBC Global Viewpoint
00:00:00
Speaker
Welcome to HSBC Global Viewpoint, the podcast series that brings together business leaders and industry experts to explore the latest global insights, trends, and opportunities.
00:00:12
Speaker
Make sure you're subscribed to stay up to date with new episodes. Thanks for listening, and now onto today's show.
Introduction of Key Speakers
00:00:21
Speaker
Thanks for joining today's episode of our Perspective Series. I'm Tian Lu, CEO of HGDC Shanghai Securities. Today we are very pleased to have Alain Li, President of French Chamber of Commerce and Industry in Hong Kong.
00:00:34
Speaker
Welcome, Alain. Thank you very much.
Chinese Consumption Post-Pandemic
00:00:36
Speaker
So, Alain, before this role, you were the regional chief executive for Asia-Pacific at luxury powerhouse Richemont, which includes world-famous brands such as Cartier, Montblanc, Piaget.
00:00:51
Speaker
So today, let's talk about Chinese consumption, which has been relatively subdued ah since the pandemic. And that's a contract from the 2010s, when Chinese became prominent on the global stage as consumers of luxury goods.
00:01:05
Speaker
So Alain, if you can give us a sense of how Chinese consumption has changed in the last five years. So the onset of the pandemic actually was quite an interesting period because firstly, it may seem counterintuitive, but all of the luxury groups experienced exceptional growth during the period 2020 to 2024, 2025. Interesting.
00:01:32
Speaker
and case of remon um I mean the the the the overall business grew by almost 50%. What happened was that because people couldn't travel, people started consuming their local market. So and again, China did extremely well ah between 2020 2024 towards end of the pandemic. And course,
00:01:51
Speaker
ah towards the end of it the pandemic and of course Things have been a little bit more challenging because I think the whole environment is has changed. Firstly, in terms of you know China's macroeconomic situation with the property market, ah definitely the so-called feel-good factor or confidence level is maybe not as high.
00:02:11
Speaker
But also the fate the other thing to remember is that people are starting to travel again. So you know they're not just consuming in their local market.
Government Actions to Stimulate Consumption
00:02:18
Speaker
They are kind traveling to other places ah to for for for leisure, ah but also to buy luxury goods. So the Chinese consumer is still a very important segment of you know the luxury consumption.
00:02:31
Speaker
What measures have the gun put in place to stimulate consumption? and any other interventions? Well, think you expand. You know better than I do. The government has been talking about and putting certain actions in terms of trading policies for vehicles and for some white goods and brown goods.
00:02:51
Speaker
ah I think Shanghai also introduced some ah vouchers for yeah FNB restaurant and so on. So there there have been some ah localized actions that have been taken or very interest industry specific, particularly to help yeah ah Chinese manufacturers as well.
00:03:10
Speaker
yeah Whether that it will lead to people feeling more confident and then you know spending in other categories, I think you know it still remains to be seen. But we're still waiting to see some of the other measures that may be rolled out in the months to come.
00:03:25
Speaker
Yeah. So has that helped local brands, the homegrown brands?
Rise of Local Chinese Brands
00:03:30
Speaker
And do you think they will continue to take market share from their international competitors? yeah Well, for sure. I mean, ah if you look at, you know, what's happened with Laopu, it's incredible. It's a remarkable story. And even some of the local fashion brands like Icicle continue to do very well. But I think that has been a shift or yeah in consumer choices with, you know, a lot of the mainland Chinese consumers.
00:03:55
Speaker
Starting to favor and to recognize the craftsmanship and the quality of of the local brands that you have here in China. So I think it's ah it's a very healthy situation. um I mean, people often forget that, you Chow Thaifuuk is huge as a business. I mean, have $80 million all the turnover, even though last couple of years have also been tougher for Chow Thaifuuk. Yeah.
00:04:16
Speaker
you know There are so domestic or, if you like, regional yeah brands that have always performed quite well and could do to be very significant. Yeah.
00:04:27
Speaker
ah You also mentioned property.
Impact of Real Estate on Luxury Spending
00:04:29
Speaker
So it's a common theory that the real estate boom, there's a wealth effect that provided support to spending on high-end goods.
00:04:39
Speaker
But do you think there will be something else to help spending on high-end goods in addition to the real estate boom? Well, I think everybody is looking at the huge amount of savings right that have been accumulated that, you know, at some point, ah hopefully will, um when when the confidence returns. Yeah.
00:04:56
Speaker
And maybe when the property market really starts to stabilize. and Yeah. And I think we we we have... but And we've seen that you know in certain areas, the property market seems to be doing a little bit better or hoping that at some point this huge pool of savings ah will not only go into ah the stock market and investments, ah but will also encourage the products to spend.
00:05:16
Speaker
And I think there are certain segments that where you've seen that. I mean, ah travel yeah has been doing extremely well. And actually, Trip.com showed that... actually domestic and international travel is actually above pre-COVID levels.
00:05:32
Speaker
um And, you know, some of the results as well from Alibaba were rather encouraging. So I think there are signs of, say, at least stabilization and maybe, you know, some ah people are starting to...
00:05:48
Speaker
ah dip into their savings and and and spending on discretionary items, travel course being the predominant one. So what does this all mean um for the luxury goods sector in China? Is there still room for growth?
00:06:03
Speaker
And if so, um which segments do you see growth?
Potential Growth in China's Luxury Market
00:06:07
Speaker
Well, I think um just in terms of the sheer demographics, yeah, thiss the size of the the China market um and also the the fact that, as i think it's been well documented, one of the phenomenons with regards to luxury goods and in China, the development of luxury goods has been you know the appetite for luxury for ah from a much younger consumer.
00:06:32
Speaker
So the average age of the luxury consumer in China up until you know recent times was was still about 10 years ago, more mature markets. So if you take those elements, the reserves in terms of savings, the fact that people have an appetite, you know they've experienced luxury.
00:06:47
Speaker
And certainly in our experience, is you although there are obviously cycles, If the feel-good factor is there, if the conditions are right, yeah then ah you know people will spend their discretionary income on the best products and the best brands that they can find.
00:07:03
Speaker
That being said, it's it's now clear that you know there are some brands that maybe during the pandemic increased prices significantly. too aggressively. yu So there's been a backlash on that. So there's some specific areas, I think, and specific reasons why maybe some brands aren't doing as well as others. But then if you look at ah you know some of the fashion brands like Bunero Cuccinelli, which is still very exclusive, yeah um has continued to perform very well even in China.
00:07:30
Speaker
And there are other brands ah that, again, remain quite exclusive but very desirable. You can see it's really good performance. yeah So you know this wears ah when When times were good and you know everybody felt really good, as we say, you know the rising tide raises all shits.
00:07:49
Speaker
ah Now I think it's a little bit more selective in terms of which brands and which categories ah people are coveting. Okay, yeah. So there there seems to be a shift in consumer behavior, you know, from just status symbols to actually you touch on that, to some more affordable goods, and also a much greater interest in high quality sustainable goods.
00:08:12
Speaker
ah So do you think that's say that's a new normal, or that's just a reflection of a temporary economic downturn? No, I think that's that's part of the basic instincts. If you have enough discretionary income, you will always want to be buy the best you can. Right.
00:08:29
Speaker
Of course, in terms of the, you know, ah VICs, or they they that they're very wealthy, they they continue to spend, continue to travel. you know The market has been supported by more aspirational ah clients who maybe now don't have that same feel-good factor or, you know, a little bit more secure in terms of their own future.
00:08:50
Speaker
you know they're cutting back a little bit but i think if they start to feel ah good about you know their prospects and and about the market then uh traditionally we've seen you know people do tend to return and and look for the best that they can and there's also been talk about in people looking for more experiences and so on but i think again that is something that you know is has always been around mean the the sir The desire to travel, to find new experiences, to go to new places, yeah something that existed pre-COVID and and we were all locked down during COVID. So now there's a kind of a revenge traveling that's happened. yeah But while people travel and while people do you know go for these experiences.
00:09:31
Speaker
ah they still want to be, in some cases, wearing the right stuff. So if you look at some of the sport leisure brands that have done very, very well, as people come also are more health conscious, yeah there are certain categories that are also benefiting and from from this new lifestyle, if you like, or new sets of priorities that consumers have.
00:09:53
Speaker
Okay. And you see that difference from different generations in particular? Not necessarily. i think you know the pursuit of health and travel is something that's actually intergenerational. In fact, ah from people I know who are in that in yeah industry, you see that actually now you see a lot of families traveling together. There are three generations yeah going ah going on on ah you know on long vacations, wanting to experience these things together. Grey economy is is one that I think people are talking about as well more and more. The other thing is you know to bear in mind that ah we, as f people...
00:10:26
Speaker
still have look for reasons for gifting or rewarding ourselves so yeah you know be it birthdays marriages engagements and so on you know people want to have something that marks that occasion for them that you know in 20 years time or three years time they can look back and there's something that uh that that confuses that special moment um And I think that is something that, you know, we still see. And that's why I think if you look at, in terms of luxury industry again, the jewelry sector has actually continued to perform ah better than the rest.
00:11:03
Speaker
ah You speaking of bio art. My previous life with Richemont, if you look at Richemont's results, the last couple of years, you know the jewelry brands have done well. And Laupou is, again, yeah an example.
00:11:17
Speaker
ah So I think people want something that endures, that you know they can see the value. They can see the craftsmanship. um ah and and help us again to you know fuse, mark really special moments in their lives.
00:11:30
Speaker
Moments I experience, everyone's desire, aspiration for. yeah um And given your long experience of managing major luxury brands in China, what common mistakes do you see that companies can make in China?
00:11:43
Speaker
to overexpand and and also to focus on service. Yeah.
Brand Strategy for Sustained Interest
00:11:47
Speaker
Sometimes, you brands, people want to expand too fast. Maybe the service hasn't been quite been there or the quality has suffered.
00:11:54
Speaker
um So if you look at, you know, some of the brands have performed very, very well, you know, their footprint still is really, you know, quite um selective ah and and and therefore, you know, people seek them out.
00:12:08
Speaker
So I think that keep the focus on ah product, product innovation, quality is still something that your consumers today ah are even more discerning. And, you know, there's so much information that's available out there that you know people ah are ah very careful about, you know, but what they buy and they want to make sure that it is yes of the best quality.
00:12:30
Speaker
yeah We have a lot of investors today at Egypt's China Conference, so I'm asking a question on behalf of them. Is there any signs that a company is going to be successful? Uniqueness in terms of its product offering and you know having that sort of desirability?
00:12:48
Speaker
There are still, you know, brands that are relatively small that, you know, are waiting to be discovered. People like newness. Yeah. um They like, you know, authenticity and and so on. So having those fundamentals and sometimes you see.
00:13:04
Speaker
Brands sort of but trying to create a story that maybe, you know, if you look into it, it's not storyteller there. but So the the authenticity in terms of the craftsmanship. Right. and And they're still, you know, i mean, even in in various parts of the world, not just in Europe, ah in Inkshire.
00:13:21
Speaker
And Laopu being what? yeah People are now discovering that this this has genuine Chinese-based craftsmanship behind it. yeah And you can see that once that, and today with you know how quickly ah information that's is circulated.
00:13:40
Speaker
ah When people discover something, they love to share. And so that flywheel effect ah can happen you know much more quickly these days than, let's say, 34 years ago when we didn't have all of these ah digital tools yeah to help us. Yeah, social media, yeah.
00:13:55
Speaker
um And are there any other consumer trends that people haven't picked it up yet? Travel will continue to be a big theme. I think, you know, maybe certain areas of the world where people have not experienced before. I know a lot of people that I speak to, you know, they're very interested now in discovering a little bit more about, you know, the Middle East.
00:14:15
Speaker
Yeah. Or in some cases, even South America, you know, everybody's been to Europe, into Japan. ah So I think there are people looking for new experiences in different parts of the world.
00:14:26
Speaker
So, yeah, if you look at the the yeah ah the trends of you a number of people traveling and so on, yeah I think that underpins that. Alan, thank you again for joining us and spending time with us.
00:14:39
Speaker
And thank you for your very enlightening insights. ah With that, we'll conclude today's episode. Thank you for joining us at HSBC Global Viewpoint. We hope you enjoyed the discussion.
00:14:50
Speaker
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