Beijing: After years of being confined at home, Chinese consumers can finally dust off their passports to travel abroad. The nation is lifting its quarantine requirements and reopening to tourism on January 8, a positive development for the world's luxury market. However, difficulties remain as the COVID infection rate in China is reportedly higher than official figures.

Since the pandemic, Beijing has worked to get rid of the virus by implementing a zero-covid policy. China, the world's second-largest economy, will overtake the United States as the largest market for luxury goods by the end of 2023, according to consulting firm Bain.

The policy, which has resulted in repeated lockdowns, has had a significant negative impact on the local economy and global markets that rely on Chinese consumer spending and manufacturing facilities.

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Due to the downturn in the sector late last year, major companies such as Capri Holdings, Estee Lauder and Tapestry lowered their outlooks in their most recent earnings.

Unusually large-scale street demonstrations against the tough policy began in November. Restrictions were eased in some major cities including Guangzhou and Zhengzhou on 7 December; These cities removed health code checks for domestic travel and eliminated the requirement that people who tested positive for the disease quarantine themselves in centralized facilities.

China announced on 27 December that it would allow international travel to resume once again in 2023. Shares of LVMH and Richemont rose 2.7% and nearly 4%, respectively, in the wake of the news.

Bernstein predicts that a rebound in Chinese consumer demand, along with a normalization of Western demand, will determine overall demand for luxury goods globally in 2023.

We estimate that there is a 50% chance that a favorable scenario will emerge, in which western demand continues to grow between 5% and 10% while Chinese luxury demand recovers between 25% and 35% in FY23.

According to Luca Solca, Renée Shao and Clémentine Flinois, analysts at consultancy Bernstein, the combined effect should result in an increase in demand for organic luxuries among mid-teens.

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Experts point out that many variables, including how China handles its rising infection rate, will affect its ability to recover. There have been reports that some hospitals in China have been filled with sick patients since the zero-covid policy was ended.

   The World Health Organization (WHO) has issued a warning that China is misrepresenting its Covid data and its definition of Covid death violates WHO recommendations.

Bernstein notes that "China will face tougher competition in [the first quarter], while an increase in COVID-19 could impact traffic and sales, as Chinese consumers reap the benefits of their newfound freedom." Weigh the risk of getting infected with- 19."

"The better the revenue outlook in [the first quarter of 2023], the faster the infection is spreading, as more Chinese may decide to go out and turn a blind eye to COVID-19." At the end of Q2, demand will probably pick up again, they add.

Meanwhile, shopping habits have evolved. According to Adam Knight, co-founder of China-focused brand consultancy Tong, "the rise of local brands, the repatriation of luxury spending through e-commerce, and the rise of domestic travel destinations such as Hainan Island, will all have a lasting impact." That would be difficult to reverse."

Chinese travelers are likely to remain cautious and favor closer locations in East Asia and Southeast Asia, according to Antonello Germano, luxury business analyst at Duxue Consulting, a Chinese research and management firm.

According to data from Trip.com, a Chinese-owned international online travel agency, flight bookings from the Chinese mainland increased by 254% on the day China announced it would reopen its borders. The top five tourist destinations were Singapore, South Korea, Hong Kong, Japan and Thailand.

Demand for international travel among Chinese is expected to increase, but Germano cautioned that many Chinese consumers may become cautious and delay their international travel, at least for the foreseeable future.

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Attracting customers from within China will continue to be a priority. Germano continues, "I believe the Chinese government will try to encourage domestic consumption first." Luxury retailers now have to compete with their Chinese counterparts in Europe and North America.

Hainan established itself as a major destination for travel shopping during the pandemic and is expected to play an important role once travel restrictions are completely lifted.

Politicians around the world are still cautious. Under current rules in effect until January 31, France will demand that Chinese travelers present a negative test result 48 hours before departure, as well as random testing upon arrival. Several other countries, including the US, Canada, UK, South Korea, Japan, Italy and Spain, also demand different types of testing.

The European Union should implement safeguards such as testing all Chinese travelers arriving in all its member states, according to French Health Minister Francois Braun, who called the COVID infection rate in China "alarming". This will help prevent the spread of the infection.

Chinese Foreign Ministry spokesman Mao Ning said the restrictions on Chinese visitors entering other countries "lacked scientific justification" and were "unacceptable". He also suggested that China "could retaliate based on the principle of reciprocity."

   According to Tongs Knight, the general public appears to support the restrictions. Far from deterring potential visitors, many online commentators have agreed that such measures are both necessary and warranted given China's recent quarantine rules and the rise in cases.

However, there will be new opportunities for Western luxury brands to attract Chinese spending. It will be important to understand how the buying habits of Chinese luxury consumers have changed and how they will buy when they travel abroad.

According to Germano, once Chinese tourists can travel again after a long period of being unable to do so, they will seek more genuine and memorable experiences.

“The pandemic acted as a catalyst, accelerating the development of some existing trends while also encouraging the emergence of others. While strategizing to attract Chinese travelers, brands are ignoring what is happening in the Chinese luxury market can not do.