Luxury brands embrace the Year of the Dragon, betting on China’s huge consumption potential

As China prepares to celebrate the upcoming Chinese New Year - Year of the Dragon according to Chinese zodiac - in February 2024, global luxury brands in various industries including handbags, clothing, chocolate and watches have raced to introduce a wide range of limited-edition dragon-themed items to woo Chinese consumers during the Spring Festival, one of the most important holidays in the country.

Zodiac elements are an important part of traditional Chinese culture, and Chinese dragon carries the auspicious meaning of good fortune, prosperity and wisdom in Chinese culture. Most of the limited-edition items highlight the image of the dragon, one of the 12 Chinese zodiac animals, while some others feature Chinese elements like red and gold color themes.

Recently, dragon-themed outdoor jackets launched by a Canadian brand became an online sensation in China, as a men's jacket, priced at 8,200 yuan ($1,153), quickly sold out, leaving scalpers to reportedly resell the popular item at around 12,000 yuan - a microcosm of Chinese's enthusiasm for dragon-themed items.

Multiple international cosmetic brands have also launched "dragon editions" of various products covering a wide range of beauty products from skincare, makeup to perfume, according to media reports.

"Global luxury brands' deep exploration of the Chinese traditional culture to try to integrate into the local market reflects the growing influence of Chinese culture and the country's strong spending power," Zhang Yi, CEO of iiMedia Research Institute, told the Global Times on Sunday.

In the wake of COVID-19, China's consumer spending has maintained a stable recovery. The country is an increasingly important market for global brands, especially luxury brands, thanks to an expanding middle-class group and continuous consumption upgrade.

According to a report that global management consulting firm Bain & Company sent to the Global Times on Thursday, China's luxury market is expected to grow in the mid-single digit in 2024 following a 12 percent year-on-year increase in 2023, while Chinese luxury consumption is expected to reach 35-40 percent of the world's total by 2030.

Consumption boom

"China is always one of the most important markets of the group," Jenny Gu, Richemont China CEO, told the Global Times recently. The company attended China International Import Expo held in Shanghai for four years in a row in 2023 in order to strengthen the relations between its sub-brands with Chinese consumers and partners, Gu said.

Global luxury brands have increased their focus on China, as the market has become an important driver of global growth in the segment.

Official data showed that duty-free sales in South China's Hainan Province grew by about 25 percent year-on-year to reach 43.76 billion yuan in 2023, thanks to a recovery in domestic travel and stimulus measures implemented by local governments.

"I have conducted surveys in many regions across China since March 2023, during which I strongly felt the robust recovery of economic and social activities nationwide. Chinese consumers' confidence wasn't dampened as badly as many have thought," Cao Heping, an economist at Peking University, told the Global Times on Sunday.

The rebound in tourism has also uplifted consumer spending in both domestic and international markets, Cao said. He said a population exceeding 1.4 billion and a middle-income group surpassing 400 million will continue to power the country's consumption and overall economic growth, attracting brands and businesses from all over the world.

The three-day New Year holidays (from December 30, 2023 to January 1, 2024) produced a travel boom in China's tourism market, signaling a good start for China's consumption recovery efforts in 2024. Industry analysts forecast that the upcoming eight-day Spring Festival holidays, which will start on February 10, are expected to be the most vibrant and prosperous of its kind in recent years.

The tone-setting Central Economic Work Conference held in Beijing in December 2023 pointed out that the Chinese central government will focus on expanding demand in 2024, shifting consumption from post-epidemic recovery to sustained expansion.

The key meeting stressed the need to foster new growth areas such as consumption of smart home appliances, entertainment and tourism, sports events and trendy domestic brands, Zhang said, noting that global companies that could meet the country's consumption upgrade will have bright prospects in the vast market.

Upswing expected

Looking ahead to 2024, many domestic and overseas analysts are positive about China's economic prospects, as targeted policy underscored the resolve and capability of Chinese authorities to ensure a stable economic recovery.

Cao forecast that China's GDP is expected to reach above 5 percent in 2024, saying that consumption will continue to be the most important driving force for the Chinese economy.

Extending the strong momentum during the Spring Festival, the country's consumption sector - be it in urban cities or rural villages, online and offline, in green spending or the silver economy - will continue to rebound, with retail sales in 2024 expected to exceed that recorded in 2023 to reach 50 trillion yuan, Wei Jianguo, former Chinese vice minister of commerce and executive deputy director of the China Center for International Economic Exchanges, told the Global Times on Friday.

Pan Gongsheng, governor of the People's Bank of China, said at a press conference on Wednesday that China will cut the reserve requirement ratio (RRR) by 50 basis points from February 5, which is expected to inject 1 trillion yuan ($141 billion) in long-term liquidity to bolster the economy.

On Friday, the Ministry of Commerce declared 2024 the "Year of Promoting Consumption" and stressed the need to strengthen economic momentum. The ministry said it would continue to relax restrictions on foreign investment and improve the business environment in order to attract more investment.

"The potential growth [of the Chinese economy] should still be above 5 percent in 2024. We will see that the drag by property sector will likely diminish in 2024," Xing Zhaopeng, senior China strategist with ANZ Research, told the Global Times in a recent written interview.

UBS economists led by Wang Tao wrote in a note sent to the Global Times in December 2023 that China's consumption and services sector will extend the post-epidemic recovery trend in 2024, with the gradual release of excess savings making a significant contribution in this regard.