Insights from the consultancy’s latest China Personal Luxury Report reveal a 3-5% market contraction in 2025 that masks profound behavioural shifts, with spending repatriating to the mainland, secondhand sales surging 15-20%, and beauty thriving whilst watches plummet by double digits.

China’s personal luxury goods market contracted between 3% and 5% in 2025, a marked improvement from the sharp 18-20% decline recorded in 2024, according to consultancy Bain & Company’s latest China Personal Luxury Report. The figures suggest the world’s second-largest luxury market may be stabilising after a prolonged downturn driven by weak consumer confidence and economic uncertainty.

Early signs of recovery emerged in the third quarter of 2025, supported by a stronger stock market and gradual improvements in consumer sentiment. Yet analysts caution that what’s emerging is not a broad-based rebound but rather a selective recalibration, with consumers becoming far more discerning about where they spend their money.

“After the turbulence of 2024, the market in 2025 began to stabilise, although consumer confidence remained fragile,” said Bruno Lannes, senior partner at Bain & Company. “What we are witnessing is not a broad-based rebound, but rather the start of a recalibration phase, with early signs of recovery surfacing in the second half of the year.”

Winners and Losers in a Fractured Market

Performance across luxury categories remained strikingly uneven throughout 2025. Beauty emerged as the standout performer, rebounding to growth of between 4% and 7%, driven by sustained demand for ultra-premium skincare and fragrances. Even amid economic turbulence, Chinese consumers continued seeking emotional and sensory experiences, making beauty products a relatively resilient category.

By contrast, other segments faced continued pressure. Fashion declined by 5-8%, whilst leather goods fared considerably worse, contracting 8-11%. Industry observers attribute this weakness to accumulated price increases and limited product innovation, which made it increasingly difficult for consumers to justify purchases.

The watch category suffered the steepest decline, contracting an estimated 14-17%. Consumers are adopting more cautious purchasing behaviours, increasingly turning towards alternative investments, pre-owned options, or sporty and smart-device alternatives. Jewellery showed relative improvement compared with 2024, with its decline narrowing to between 0% and 5%, supported by wealth-preservation considerations and rising gold prices.

“In an increasingly selective market, category dynamics and brand fundamentals are becoming progressively more important,” said Priscilla Dell’Orto, partner at Bain & Company. “Brands that maintain strong desirability and deliver clear value through innovation and carefully calibrated pricing strategies are proving more resilient.”

Spending Patterns Shift Homeward

A notable reversal occurred in where Chinese consumers chose to make their luxury purchases. Bain estimates that 65% of Chinese luxury consumption occurred within mainland China in 2025, whilst 35% took place overseas—a pronounced shift from the previous two years when overseas spending surged.

This repatriation of luxury spending was driven partly by favourable currency movements and narrowing price gaps between mainland China and key luxury markets. Historically, substantial price differences—sometimes reaching 30% when the Japanese yen hit its lowest point against the renminbi—made overseas shopping particularly attractive. However, exchange rate adjustments and brands’ efforts to harmonise global pricing have reduced these arbitrage opportunities.

Growing domestic tourism and ongoing shopping centre promotions further supported mainland consumption, despite the continued recovery of outbound travel. The shift represents a potentially significant opportunity for luxury houses to build stronger direct relationships with Chinese consumers on home ground.

Grey Market Under Pressure, Secondhand Sector Flourishes

The so-called daigou market, where individuals purchase luxury goods abroad for resale in China, showed signs of structural constraint in 2025. Sales amongst the top 45 brands tracked on daigou platforms by Re-Hub rose just 3% in 2025, compared with 5% in 2024, as brands intensified efforts to regulate grey-market sales and protect brand equity.

At the same time, China’s secondhand luxury market continued its impressive expansion, growing 15-20% in 2025. Despite this growth, the segment remains underpenetrated, representing less than 10% of the primary luxury market, well below the 20-30% penetration seen in mature markets such as the United States and Japan.

The resale market’s expansion was supported by increased supply of pre-owned merchandise, rising consumer acceptance, particularly amongst younger, more price-conscious shoppers, and the widespread adoption of livestreaming as a trusted channel for product authentication and engagement. Platforms including Douyin and Xiaohongshu have become integral to the resale ecosystem, with some livestreaming hosts achieving monthly transactions exceeding one million yuan.

“The secondhand market is evolving into an increasingly established and complementary pillar of China’s luxury ecosystem,” said Elle Yang, partner at Bain & Company. “Its continued expansion reflects changing consumer mindsets as well as the increasing maturity of the overall market.”

Domestic Brands Gain Ground

Local Chinese luxury players continued to gain market share in 2025, particularly within beauty and select personal luxury categories. These brands are securing traction through culturally resonant product aesthetics, digital-first go-to-consumer strategies, and competitive pricing enabled by local supply chains.

As competition intensifies in a low-growth environment, the gap between market winners and laggards is widening considerably. Consumers are consolidating spending towards a smaller group of preferred brands that deliver perceived “true value”—whether through accessible luxury positioning or ultra-premium propositions.

Cautious Optimism for 2026

Looking ahead, Bain expects China’s personal luxury goods market to achieve modest growth in 2026, though volatility and uncertainty are expected to persist. An expanding middle class, improving consumer confidence, and favourable government policies may help redirect luxury consumption towards the mainland, yet growth is likely to remain highly dependent on specific categories and individual brand performance.

The evolution in consumer behaviour towards experiential consumption including travel and wellness, and away from purely material purchases appears likely to continue. For luxury houses, success in China’s evolving market will increasingly depend on their ability to balance exclusivity with accessibility, whilst demonstrating clear value in an environment where consumers are more exacting than ever.

The market’s trajectory suggests that China remains a cornerstone of global luxury growth, but the rules of engagement are fundamentally shifting. Brands that can successfully navigate this recalibration, offering innovation, cultural resonance, and authentic value, stand to benefit as consumer confidence gradually rebuilds.