China’s VICs and the exodus of Chinese millionaires: Luxury’s next opportunities

The following is a preview of Jing Daily and Spring Studios’ partnership report “Bridging cultures, shaping markets: The influence of overseas Chinese on the global luxury landscape.” Get your copy today on our Reports page. Over the past year, the personal luxury goods market has experienced a notable shift. The robust double-digit growth seen in previous years has tempered to a low-to-mid-single-digit increase. Both Kering and LVMH have reported a sales contraction in Q1 in Asia, with the primary cause being a slowdown in Chinese demand. Despite macroeconomic challenges affecting the broader market, a core group of elite customers continues to drive growth. The economic downturn has impacted entry-level luxury consumers more significantly than high-net-worth individuals (HNWIs). Globally, the wealthiest 2% of customers contribute roughly 40% of luxury sales. In Asia, the divergence between aspirational and wealthy customers has become increasingly evident. China's Very Important Customers pivot to domestic consumption In China, a significant shift in purchasing behavior has emerged, with luxury spending moving from overseas to domestic markets. Before the pandemic, 60% of China’s luxury spending occurred overseas. However, extended border closures, efforts by brands to strengthen their domestic presence, and government initiatives to boost local consumption, particularly in luxury hubs like Hainan, have driven a pivot toward domestic spending. Even with the rebound in international tourism and shopping, this trend continues, carrying significant implications for the global luxury market. The exodus of China’s millionaires While global brands may no longer rely as heavily on Chinese tourists’ overseas spending, a growing group of affluent Chinese living abroad presents a new opportunity. Last year, China experienced the largest annual exodus of millionaires. Data from Henley & Partners shows a net total of 13,500 HNWIs migrated out of China last year, following 10,800 in 2022. This migration highlights the importance of targeting the affluent younger generation residing in countries like the US, UK, and Singapore. In 2018, young HNW Chinese individuals had an average wealth of $5.6 million, a figure that will continue to grow as they inherit wealth. The US: Premier destination for education and professional opportunities The US is home to approximately 28% of the 8.6 million Chinese living abroad (UN, 2020), underscoring its role as a premier destination for education and professional opportunities. The educational attainment of Chinese immigrants surpasses that of the broader immigrant and native populations in the US. In 2021, Chinese nationals received 54% of the US’ 2,900 immigrant investor visas, indicating a highly skilled demographic with significant consumption power. The UK: A growing community of Chinese students, school-age parents The UK’s appeal to Chinese students and investors significantly influences its cultural diversity and real estate market. In 2018, Chinese parents spent over $2.5 billion on London property for their children studying there. The number of Chinese students in the UK surged 41% between the 2017-18 and 2021-22 academic years. Among young international pupils, those from mainland China constitute the largest demographic, with 8,744 individuals. Nearly half of these pupils’ parents have also chosen to reside with their children in the UK. Singapore: A haven for UHNW Chinese Singapore’s attraction to Chinese HNWIs for emigration reflects its strategic position as a favorable investment and living environment. In the first three months of 2023, more than 10% of luxury condominiums sold in Singapore were purchased by mainland Chinese buyers, a significant increase from approximately 5% in Q1 2022. The number of single-family offices – private companies established to manage the wealth of a single family – in Singapore has surged from 50 in 2018 to about 1,100, with an estimated half of this growth attributed to Chinese clients. The substantial economic and social contributions of overseas Chinese in these locations highlight their importance as a key demographic for luxury brands. Download our full report to learn what this means for brands in 2024.

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China’s VICs and the exodus of Chinese millionaires: Luxury’s next opportunities