China's push to redistribute wealth unsettles luxury goods industry

Xi's push to redistribute wealth in the world's second-largest economy has unsettled some luxury market investors, the report said.

Shoppers in mainland China are vital to brands such as LVMH, Hermes and Gucci. Last year, as the coronavirus pandemic took hold worldwide, China's case numbers remained relatively low and the country's share of the global luxury market roughly doubled, according to consultancy Bain. The firm predicts that China will become the world's biggest market by 2025, overtaking Europe and the US, the report added.

The latest government initiative — which coincides with a regulatory crackdown on industries from technology and education to gaming and entertainment — has raised concerns, the report said. 

But experts are divided on whether "common prosperity" will hurt luxury sales, which total hundreds of billions of dollars a year.

Many analysts believe the campaign could actually be good for business. While Xi's plans are still taking shape, his government has made clear that it ultimately wants to raise the incomes of more households and expand the middle class. That, in turn, could help increase purchasing power and consumption.

But experts haven't ruled out the possibility of the government clamping down on signs of perceived extravagance or raising taxes on the rich, which could darken the outlook for makers of high-end handbags, shoes and jewellery, the report said.