Is China’s Rising GDP Good For Luxury?

What happened: Nikkei Asia reports that China’s gross domestic product expanded by 4.9 percent over the third quarter of 2020 on rising trade and consumption. According to the Wall Street Journal, the outcome is “putting China’s economy back toward its pre-coronavirus trajectory half a year after the pandemic gutted its economy.”

Jing Take: The acceleration of China’s economic rebound is good news for luxury brands. With the eurozone’s GDP shrinking by 11.8 percent in Q2, employment dropping by 2.9 percent, and analysts forecasting that Europe is facing “its worst recession ever,” China has become the champion of the entire industry.

A return to normalcy in China indicates that the economy is in good shape and that consumers can still afford products of higher market value. It also signals an increase in consumption and the value of purchases.

UBS research highlights that September retail sales growth picked up further to 3.3 percent year-on-year from 0.5 percent in August. The significant average growth in retail sales for the third quarter of 2020 climbed to 0.9 percent from -3.9 percent in Q2. Apparel sales rebounded from 4.2 percent to 8.3 percent, while online goods sales slowed further — from 17 to 11 percent.

Taking into account this strong Q3 performance, we expect further growth in Q4 with a focus on domestic demand and public investment. A shift in power in Washington and an end to trade hostilities between China and the US would also serve Beijing’s agenda and benefit the entire region. In fact, Reuters highlights how the synergy between the yuan and Asian trade-related currencies, as both rebounded following the news of China’s GDP growth.

The Jing Take reports on a piece of the leading news and presents our editorial team’s analysis of the key implications for the luxury industry. In the recurring column, we analyze everything from product drops and mergers to heated debate sprouting on Chinese social media.

Categories

Trending in China