Hainan's southernmost city, Sanya, is known as the «Hawaii of China.» Photo: Xinhua/Shutterstock
Walking through Haikou Meilan International Airport, Hainan Island, China's economic crisis, is far from sight.
Across thousands of square meters, tourists flock to luxury stores including Burberry, Jimmy Choo and Bottega Veneta .
Excitement The surroundings of this duty-free island hub have already attracted the attention of European luxury retail investors eager to snap up their share of the so-called «Hawaii of China.»
LVMH, the luxury giant owned by the world's second richest man Bernard Arnault, announced on Tuesday that it would build a shopping center more than four times the size of Bicester Village in Hainan's southernmost city of Sanya.
The company's decision comes as wealthy Chinese consumers are shunning waste in Western capitals.
Some 62% of luxury goods purchases by Chinese shoppers took place in China in April this year, up sharply from 41% in the same month in 2019. , reports Sandalwood Advisers.
Arnault's latest move suggests luxury retailers are betting that will change forever.
The 28,000-sq.-ft. meters will feature more than 1,000 luxury brands, including LVMH-owned Louis Vuitton and Dior.
 have great potential,” he wrote.</p>
<p>< p>Barclays analysts estimate that Hainan accounts for up to 15% of mainland China's luxury goods market and a quarter of cosmetics sales.</p>
<p>“We think that in the long term, Hainan can become the largest luxury and travel retailer. in Asia,» they said earlier this year.</p>
<p>They highlighted China's decision to triple its annual duty-free allowance to US$15,000 in 2020.</p>
<p>The Chinese government now plans to give the island its own tax regime by early 2025, meaning retailers operating there will only pay 15% corporate tax, as opposed to 25% in wider China.</p>
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The retreat of China's wealthiest shoppers is causing problems for luxury retailers in Western countries. Photo: VCG/Visual China Group
Big bet for the country Hainan's economic growth is slowing elsewhere as households cut spending and property prices fall.
The Chinese government is expected to barely hit its lowest growth target in decades this year at 5 %.
>A possible indicator of the economic crisis emerged recently when the Office of National Statistics suddenly stopped reporting the unemployment rate for young people aged 16 to 24.
Deutsche Bank has warned that Chinese consumers are a key driver of growth in the luxury sector worldwide. – and even they appear to have become more cautious after the initial post-pandemic boom.
The retreat of China's wealthiest shoppers is creating problems for luxury retailers in Western countries.
“We expect «European demand will be less supported by tourism from the US and China than before,» said Matt Garland and Adam Cochrane from Deutsche Bank.
Overall retail sales in China have also not yet recovered to pre-pandemic levels. , as concerned consumers cut back on spending.
But spending on luxury goods, which appeals to a narrower segment of buyers, was driven by a boom in “revenge” shopping earlier in the year, according to Garland and Cochrane.
Some, including Garland and Cochrane, suggest that the surge has already passed its peak: «We expect Chinese consumers to be more cautious in spending on luxury goods for the rest of 2023 and into 2024, given economic uncertainty.»< /p>
Despite this, the world's second richest man is pushing ahead in Hainan.
His optimism is shared by Mr Maag: “[Hainan] is on the right path to becoming a luxury jewel shopping for all the world's major luxury brands.»
For the battered Chinese economy, the arrival of Mr. Arnault and the world's largest luxury goods company in Hainan will be a welcome relief.
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