As Chinese consumers pull back on discretionary spending, the world’s biggest luxury groups are confronting a deeper question about growth, market dependence and the changing dynamics of global fashion.
Europe’s luxury industry is facing a costly reassessment of its relationship with China. The six major listed groups – LVMH, Hermès, Kering, Richemont, Prada and Moncler – have lost a combined €251 billion in market value this year, according to the Financial Times. Behind the sell-off is a consumer market that was once central to luxury’s expansion but is no longer delivering the growth brands and investors had come to expect.
The scale of the losses suggests the problem extends well beyond individual brands or disappointing quarterly results. For much of the past two decades, China was one of luxury’s most important growth engines, fuelling demand for European fashion, leather goods, watches and jewellery. Its expanding affluent class helped justify international store expansion, aggressive pricing strategies and ambitious revenue forecasts. That growth model is now being tested.
The shift is evident in consumer spending. Bain & Company’s 2025 China Personal Luxury Report estimates that mainland China’s personal luxury market contracted by 3 to 5 per cent in 2025, following a much steeper decline of 17 to 19 per cent in 2024. Although the market showed signs of stabilisation towards the end of 2025, consumers remained cautious, increasingly selective and more conscious of value.
For luxury houses, this represents more than a temporary slowdown. Consumers are reassessing what they buy, where they shop and what they consider worth paying a premium for. Experience-led spending, domestic travel and wellness are competing more directly with traditional luxury purchases, while local Chinese brands are becoming increasingly relevant to consumers seeking products that reflect their preferences and cultural identity.
The pressure is also visible in corporate performance. LVMH’s third-quarter 2026 results exposed continued weakness in its fashion and leather goods division, with the group pointing to a less buoyant environment in China. Kering has also reported declining Chinese consumer demand. Even brands with stronger positioning are navigating a market where previous growth assumptions are proving difficult to sustain.
But China’s influence on global fashion does not end with what its consumers choose to purchase.
The country’s broader economic adjustment is creating consequences across international markets. The International Monetary Fund has identified weak domestic demand, the prolonged property downturn and deflationary pressures as significant challenges, while warning that China’s growing reliance on exports is creating imbalances for trading partners.
For European businesses, the challenge is twofold: weaker demand from Chinese customers and increasingly competitive Chinese manufacturers. For commodity-exporting economies, including South Africa, China’s industrial activity and demand for raw materials remain important. The country is a major destination for South African exports including iron ore, manganese and chromium.
This is where the luxury slowdown becomes part of a much wider economic conversation. China is simultaneously becoming a more challenging market for international brands and a more formidable competitor in global manufacturing.
For luxury groups, the immediate priority is likely to be rebuilding demand, protecting brand desirability and reassessing the growth strategies that once depended heavily on Chinese spending.
The bigger question, however, is whether the industry can develop a more balanced global growth model.
China remains too significant to overlook. But the assumption that its consumers will continue to underpin luxury’s next phase of expansion is becoming harder to defend. For an industry built on aspiration, pricing power and the promise of perpetual growth, that shift may prove more consequential than the market-value losses themselves.
