Strong Chinese outbound travel and luxury spending are, by some estimates, fueling economic growth all around the world. And, as a slowdown looms, the consumption power of Chinese jetsetters is proving increasingly vital to the businesses of luxury brands, high-end retailers, and destinations alike.
Chinese President Xi Jinping assured hundreds of thousands of attendees to the huge China International Import Expo (CIIE) in Shanghai this week that the country is going to keep buying. In the face of a slowdown, he nonetheless pledged to increase the value of goods and services imported into China to 30 trillion and 10 trillion, respectively, over the next 15 years.
Some critics were skeptical this massive import growth is achievable. Last year, goods imports to China totaled 1.84 trillion, the Chinese government said. Now, imports of travel services to China alone are expected to reach over 1.4 trillion in the next five years.
Luxury goods companies have been rattled by fears of a potential slowdown in spending by Chinese customers, who account for a third of industry sales, as a trade war with the United States goes on. Multiple European luxury brands have also lowered their prices in China and continue to expand their digital presence in the country, which is in line with the President and the Chinese government’s goal of boosting the economy through domestic consumption.
Thanks to Chinese global travelers’ sizable spending power, which accounted for nearly a fifth of total global travel revenue last year, the projected slowdown in Chinese demand will likely not impact luxury brands to a significant extent. And while Chinese travelers are spending less per trip, they are still shopping and splurging abroad, according to China Luxury Advisors.
For example, during Hermès’ Q3 2018 revenue conference call on Wednesday, CEO Axel Dumas said that both sales in mainland China and by Chinese tourists traveling overseas remained solid. L’Oreal CEO Jean-Paul Agon also said last week that he saw no slowdown in sales in China.
So far, Chinese travelers have been the largest source of outbound tourists and consumers for six consecutive years – their consumption contributed more than 10 percent to the international tourism market’s growth, according to a report from China’s Ministry of Commerce released ahead of the Expo.