SHANGHAI/LONDON: China is on track to overtake Japan as the second largest luxury market in the world by 2019, according to new industry data from Euromonitor International.
Even though China dropped from third to fourth place in the research firm's global rankings because of slowing growth and a government clampdown on extravagant consumption and luxury gift-giving, the country is still expected to rebound.
Writing in Luxury Society, Fflur Roberts, head of luxury goods at Euromonitor, said China is expected to post 4% real growth in 2014, rising to 6% in 2015, with luxury spending forecast to increase by 52% in real terms over the next five years.
"China is still on course to overtake Japan as the second biggest luxury market in the world, but this shift will now be delayed until 2019 as opposed to the previous prediction of 2016," she said.
Disposable income in China is expected to increase 64% by 2019 and that, combined with high spending by wealthy Chinese tourists, will help drive overall global luxury spending by 19% to $405bn.
The US, which remained the largest luxury market in 2014 with a valuation of $78bn, is forecast to retain its top position in 2019, but Chinese spending will contribute to the global total.
"We expect to see more spending by wealthy Chinese tourists outside mainland China as well as amongst Chinese diasporas," Roberts explained.
"Many high-income consumers from the mainland are likely to look to relocate overseas, with the US, Europe and Canada top choices for a new home. As they move, so will their buying power," she added.
Turning to the outlook for the rest of the world, Euromonitor reported that India remains the fastest growing market having increased its real market value by 98% over the last five years.
Meanwhile, Western Europe – buoyed by luxury shopping destinations like London, Paris and Milan – remains the largest region with $113bn in sales.
But luxury sales in Eastern Europe remain muted because of economic sanctions in Russia and prevailing political instability.
Data sourced from Euromonitor, Luxury Society; additional content by Warc staff