“Now comes China’s recovery”: but for everyone? For real?

“Now comes China's recovery”: but for everyone? For real?

The markets believe in China‘s recovery and the knock-on effect on luxury accounts. The markets, however, believe a little less in Gucci‘s ability to intercept the possible return of the Asian dragon. Although, trips, first by François-Henry Pinault, Kering‘s number one, and then by Marco Bizzarri, Gucci’s CEO, to Beijing suggest that the double-G brand has great faith in the People’s Republic. There are diverging impulses from Beijing. For, on the one hand, wealthy Chinese ready to travel and shop give hope. But, on the other, the government’s caution about the real growth prospects of the local economy is jarring.

China’s recovery

Outgoing Chinese Premier Li Keqiang announced that the GDP growth target for 2023 is +5%. The lowest in decades. Only in 2020, the year of the pandemic, Beijing’s ambitions were lower. For the premier, there are three major problems: insufficient domestic demand, employment stabilisation (which is complicated) and the major fiscal difficulties that some local governments face.

Barclays believes in it

But, despite this, Barclays is quite optimistic. According to its survey, based on passenger traffic in the metros, there is an upturn in shopping. And international travel should pick up again in the coming months. Barclays expects around 15% of spending to move abroad. The bank’s experts expect China to grow by 19% this year, up from +15% in 2022. This growth will contribute to the +12% that the luxury sector will post overall this year, compared to the previous estimate of +9%. “In China, there was a faster-than-expected recovery in January. In February, the Chinese New Year drove purchases,” Barclays’ Carole Madjo told MF Fashion. According to the same analyst, we will see polarisation again this year. Some will run, like Louis Vuitton, Hermès, Chanel, Dior and Cartier, and some will walk, like Gucci. That will also influence the speed of its parent company Kering.

Diplomatic journeys

Precisely in order to see for himself what is happening in China, and to understand the performance in that market of the brand he heads, Gucci’s CEO Marco Bizzarri travelled to the country of the Great Wall. According to Ladymax, who cites insiders, Bizzarri’s goal is to gather information to create strategies aimed at relaunching the brand. Because the brand’s retail sales in China would not have improved much from the -15% recorded in the fourth quarter of 2022. According to the Chinese newspaper, Gucci needs to strike a balance between retaining established customers and attracting new generations. The key is to reshape the classics in order to obtain a solid market base.

In photo, Shutterstock archive, a mall in Shanghai

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