HONG KONG: The Chinese luxury market should become the largest in the world by 2020, benefitting global players like Louis Vuitton and a new breed of local challengers.

Brokerage and investment group CLSA surveyed 340 consumers and 31 store managers, and reported a majority of shoppers either recently made a category purchase or plan to do so in the near future.

Respondents buying exclusive goods in the last year generally allocated between 10% and 12% of their household budgets to such items, demonstrating what CLSA termed a "high propensity to spend".

The number of extremely affluent individuals worth more than 1,000m yuan ($153m; €110m; £94m) has also climbed by 50% annually since 2000, hitting 1,363 in 2010.

"As incomes rise, China's burgeoning middle class is adopting previously unattainable high-end lifestyles and is transitioning from a saving to spending culture," the company added.

One unique feature of the Chinese trading climate is that buyers are 15 years younger than elsewhere, suggesting manufacturers must adapt their approach accordingly.

"Foreign luxury brands in particular, with large logos and signature collections are particularly desirable," the study said.

Indeed, there is a discernable willingness to pay extra for exemplary products, as shown by the fact fine wine prices rose 40% in 2010.

Craftsmanship is another valued trait, while acquiring luxury offerings when travelling has emerged as a pastime carrying a certain "cachet".

Almost 20% of shoppers give top-quality goods as presents, with handbags, clothing, watches and jewellery attracting favour here.

"This is particularly popular around important Lunar holidays such as the Chinese Lunar New Year in early February," CLSA argued.

Gender differences also reverse conditions from areas including the US and Europe, as men typically yield greater potential than women.

"The luxury market in China is still largely male-dominated given workforce demographics and the culture of gift giving for business purposes," the report said.

"Spending amongst female consumers in China is increasing and luxury handbags are gaining increasing popularity; this will be positive for foreign brands such as Gucci, Hermes, Louis Vuitton and Prada."

In return for their investment, customers demand personalised goods and service, reflecting the aspiration to be "treated like a VIP".

Bulgari, Gucci, Hermes, Louis Vuitton, Richemont and Swatch are already making considerable progress in China, and the country is anticipated to generate half of the sector's global growth in the coming decade.

More specifically, China could account for 44% of total premium products and travel sales by 2020, measured against a total of just 15% today.

The world's most populous nation should deliver an annual acceleration of 23%, meaning it will become the industry's biggest outlet by the same date, worth €74bn per year, or 0.6% of domestic GDP.

"It is only a matter of time before Chinese luxury brands are established at home," CLSA added.

"We expect this to happen in product categories where China has a perceived fundamental advantage, primarily in the use of materials such as jade, porcelain or precious woods.

"In the meantime, we expect Asian companies to look to acquire European brands and build up manufacturing expertise."

Some locally-listed firms tipped for success are apparel group Ports Design, cosmetics specialist Sa Sa International, Parkson department stores, menswear chain Trinity and watchmaker Hengdeli.

Data sourced from CLSA; additional content by Warc staff