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China Ban on Official Extravagance Decimates Luxury Brands
By wchung | 29 May, 2026

Imported luxury brands have seen a sharp drop in sales growth after Xi Jinping imposed a ban on official ostentation, according to Beijing’s Business Value magazine.

Shanghai’s glitzy Waitang shopping district recently saw the closing of Giorgio Armani’s flagship store, as well as those of Patek Philippe, Dolce & Gabbana and Boucheron.

Some analysts attribute their demise to the recent slowdown in China’s growth as well as the austerity measures imposed by Xi Jinping in December immediately after succeeding Hu Jintao as the leader of China’s ruling Communist Party. One of his measures bans acceptance of lavish gifts by government officials. The most popular types of gifts — which often serve as bribes — include luxury watches, premium liquor and wine and the works of modern Chinese artists.

The ban has also had an impact on the conspicuous consumption of private citizens. Unlike in most developed societies where public officials are seen as models of prudence and probity, in China public officials are often seen as icons of power, influence and success. Their consumption habits are emulated by members of China’s exploding middle class.

The slowing of luxury goods sales growth from 30% in 2011 to just 7% in 2012 suggests the potential long-term impact of the Xi’s official austerity measures which had only been in effect for only the month of December. The 115 billion yuan ($18.5 bil.) such goods racked up in 2012 sales are likely to be hit even harder during 2013.

China has been the top growth market for the world’s luxury goods makers, and their sales are being hit hard by the austerity trend.

Between 2001 and 2011 the Federation of Swiss Watch Industry saw watch exports grow from CHF10.29 billion ($11 billion) to CHF19.03 billion ($20 billion), an 84.81% growth rate. During that same period exports to China grew 123.73%. But in the second half of 2012 watch exports to China plunged 47.17% from the same period of 2011. The figure represents a 23.11% drop from even a decade ago.

Luxury goods conglomerate LVMH — whose brands include Louis Vuitton, Moet & Chandon, Hennessy, Mercier, Dior, Donna Karan and Fendi — reported 12% profits growth to €3.24 billion ($4.5 billion) in 2012, a third of 2011’s 34% growth.

China-based retailers of imported luxury goods have also been hit by the growing trend of buying such goods while traveling to take advantage of lower overseas prices. An estimated 60% of luxury goods purchases by China’s consumers were made overseas last year, according to Bain & Company. This trend has forced China-based retailers to make sharp price cuts.