China Seen as Key to Luxury Sector Rebound in 2026

Luxury is back. Following a relatively stagnant 2025, the industry is forecast to accelerate in 2026, with China’s long-awaited recovery emerging as a pivotal factor, even as the war in Iran casts a shadow over global markets, according to analysts.

Estimates vary, but HSBC, Deutsche Bank and BNP Paribas all forecast global sales growth ranging from 5.5 to 6 per cent this year.

“We believe it is time to look at the sector, as we think the organic sales growth rate should further accelerate in 2026 and return to growth after two years of more muted sales growth rates … mostly driven by the two key drivers of growth: the US and China,” wrote HSBC analysts led by Anne-Laure Bismuth in a March 30 note. 

Despite the war in Iran and turmoil in global energy markets, HSBC held its forecasts for the two main drivers of luxury growth – mainland China at 8 per cent and the United States at 10 per centwhile cutting its outlook for Europe from 4 to 2.5 per cent and revising the Middle East from 6 per cent growth to a 5 per cent decline.

Agreeing that China’s recovery would be a crucial driver for the sector this year, analysts from Deutsche Bank cautioned that the recovery might be “volatile” as the country’s economy still faces many challenges, namely the lingering property crisis.China’s real estate downturn might be showing early signs of stabilisation, according to analysts, but big uncertainties remain.

In February, home prices in the four tier-one cities flatlined, month on month, ending nine consecutive months of decline.

Year on year, however, the picture remains grimmer: new home prices in those cities fell 2.2 per cent, a 0.1 percentage point steeper drop than the month before, according to the National Bureau of Statistics. Despite the challenges, Deutsche Bank analysts led by Adam Cochrane remained confident that China’s potential for recovery was intact, pointing to Beijing’s efforts to support real estate and encourage consumer spending – steps that showed “early positive signs” during the Chinese New Year holiday period.

“We remain confident these measures will support recovery in luxury spending during 2026, although the shock from higher oil prices may delay the recovery,” they said in a note on Wednesday.

Looking beyond 2026, analysts at BNP Paribas expect a 10 per cent compound annual growth rate for China’s luxury market for the five-year period of 2027 to 2031, citing a “modest and gradual improvement” in Chinese consumer sentiment.China’s roughly 25 million affluent consumers are poised to open their wallets again, buoyed by stronger financial markets and employment growth in the artificial intelligence sector, after years of wealth accumulation and high savings rates, according to a note by the bank in January.

BNP Paribas equity research analyst Melania Grippo saw the slowdown that the Chinese luxury market experienced in the past few years, as its economy struggled, as a coming of age – the market simply beginning to behave like its more mature Western counterparts.

European luxury giants, including LVMH, Kering, Prada, Richemont and Burberry, all reported improvements in their 2025 China sales. LVMH’s general secretary, Marc-Antoine Jamet, has expressed the group’s full confidence in China, which he referred to in November as the “beating heart of global luxury”.