China market growth forecast to rebound in 2026 after prolonged slump

China’s luxury market has shrunk to a prolonged period of stagnation and decline between 2022 and 2025.

The luxury market has decided to rebound, as some signs are showing stabilization in China’s economy.

After nearly three years of volatility, China’s luxury market is showing early signs of stabilization.

Latest reports evaluate that, by the fourth quarter of 2025, investment conversations resumed, long-paused projects returned to planning, and brands began reassessing how and where to place their bets in China once again.

As reported by Reuters, consultancy Bain & Company informed on Thursday, January 29, 2026, that China's personal luxury goods market is expected to return to modest growth in 2026 but warned the recovery would be fragile and uneven across brands and categories.

Key expectancies:

Consumer confidence in China, which accounts for about a quarter of luxury spending, has been hit by a prolonged property crisis and job concerns, forcing luxury brands to rethink their strategy in the world's second-largest economy.

According to Bain, as China's mainland luxury market shrank 3% to 5% in 2025, recovering from a drop of 17% to 19% in 2024, the consultancy forecast that the world's second largest economy would remain a "cornerstone of luxury market growth.

"Brands catering to affordable luxury and ultra-premium segments emerged as winners, delivering perceived 'true value," the consultancy said in its latest China luxury report.

Despite cautious consumer sentiment in much of 2025, the luxury sector showed signs of stabilization from the third quarter, helped by a stronger stock market and better consumer confidence while coming off the weak base of 2024, Bain said.

Looking ahead, it expects "modest" expansion in 2026, supported by a growing middle class, rising consumer confidence, and policy measures that spur domestic consumption.

However, the growth will stay "segment specific," said Bruno Lannes, a senior partner.

The consultancy described 2025 as a "recalibration" year for the world's second-largest luxury market, with shoppers becoming more selective and trending towards items offering "true value."

Emerging Chinese brands are capturing consumer attention:

The market-evaluating consultancy said that the rise of local players was a key trend in 2025 as travel and wellness experiences retained priority over material purchases.

"These emerging Chinese brands are capturing consumer attention with offerings that blend innovation and cultural relevance, positioning them as strong competitors," it added.

The report suggests that performance across categories was mixed, with beauty the strongest, rebounding to growth of 4% to 7%, while demand for fashion fell 5% to 8% as it still outperformed leather goods, which dropped 8% to 11% in recent price hikes.

In addition to that, the demand for watches slumped an estimated 14% to 17% as consumers turned to investments or second-hand alternatives.

The jewelry sector's decline also narrowed to up to 5%

The report supports recent earnings results from the likes of LVMH, had better-than-expected sales in the fourth quarter, benefiting from improved China demand, though CEO Bernard Arnault said he was cautious about the year ahead.

Burberry also beat expectations for sales growth in the key holiday quarter, which the British luxury brand attributed to successfully attracting more Chinese Gen Z consumers.

This month, Cartier owner Richemont reported sales ahead of market expectations, partly thanks to a continued recovery in greater China, its second-biggest market.

"Brands that maintain strong desirability and deliver clear value through innovation and targeted pricing strategies are proving more resilient," said the evaluating consultancy.