kbuster with travel restrictions easing and many Americans venturing back to Europe to make the most of a strong dollar.” He added that signs of a recession were yet to be seen.History has proven that luxury consumers are more ​​poised to weather an economic downturn, but the way China’s luxury market is unfolding could be an indicator of what is to come.One of the largest consumers of luxury goods, China has yet to lift its restrictions against Covid-19. The country’s strict zero-Covid policy requires smaller scale lockdowns in affected counties and cities, which means little to no economic activity during this period. As a result of this policy, economic recovery has been volatile. Early signs of a recession have emerged as consumer confidence declined significantly over the course of this year.In March, Shanghai entered a two-month lockdown that paused the lives of its 25 million residents.. At the time of writing, more than 200 lockdowns were being implemented in different parts of the country.Currently, the Chinese government has no plans to ease restrictions despite the policy’s impact on the country’s exports, property market and unemployment. Economic instability Among the most affected industries by the recent waves of lockdown is manufacturing and exported goods. Major factory hubs such as Shenzhen and Tianjin have been struggling to operate continuously and produce some of China’s biggest exports, including products for Apple and Tesla. Because of this, many international companies have pulled production from China and shifted them to neighbouring countries in Southeast Asia, or India.Reported by CNBC, India has been one of the few countries to experience comparatively robust growth due to its outlier economy, while China has started to lose its manufacturing and export dominance.Aside from manufacturing, demand across the board is sluggish as consumers find fewer and fewer reasons to spend in lockdown. Tesla went as far as to cut the price of its electric vehicles in China due to weakening demand.Between this and the property crisis, China’s gross domestic product (GDP) has taken a big hit, with third-quarter GDP rising by 3.9 per cent compared to the same period last year, making the government’s goal of reaching 5.5 per cent unattainable.To make matters worse, some homebuyers have refused to pay their mortgages due to construction problems plaguing a number of China’s biggest developers. Total liabilities disclosed by major companies Evergrande, Kaisa and Shimao amassed to more than 2.6 trillion yuan, as reported in 2021. Panic selling The crisis has not only impacted the lower and middle classes; the country’s upper echelon are also feeling the pinch. Secondhand retailers in Shanghai and Hangzhou have reported a huge jump in consumers selling off their luxury goods, namely Birkin bags from Hermès and Rolex watches, to raise quick cash.According to Zhu Tainiqi, founder of a secondhand luxury goods platform called Zzer, the number of consignors has soared by 40 per cent over the same period last year. The Shanghai-based company has more than 12 million users and is expected to sell five million luxury products this year.However, consignors are far from making profit. The value of popular Rolex models like the Submariner fell by nearly 60 per cent and even the highly sought after Birkin has dropped in value by 20 per cent. This is a stark contrast to last year, when the price of the Rolex Submariner rose by 250 per cent.Various Chinese resale platforms have also seen the value of designer brands like Prada and Fendi depreciate greatly as consignors rush to liquidate their luxury goods.On top of reselling their handbags and watches, many high-net-worth individuals are also starting to curb their shopping appetite given the uncertain economy. Data from Barclays showed luxury sales in China plunged by 40 per cent during Q2 of this year.Ou Huimin, a veteran vintage reseller in Guangzhou, explains consumers’ spending habits have become increasingly conservative as their priorities shift during this time. “Now, consumption has become more rational,” she said. Youth unemployment Another factor that could bring serious ramifications to China’s luxury consumption is record high youth unemployment. According to the country’s National Bureau of Statistics, youth unemployment for ages 24 and below, peaked at 19.9 per cent in July.  The data recorded a slight drop to 18.7 per cent in August, but this remains the highest ever in China’s recent history. According to calculations by CNN, this represents nearly 20 million young people out of work. During this year alone, more than 10.7 million Chinese youths have graduated tertiary education and many have not been able to secure a job as the country goes in and out of lockdown.Gen Z, youths aged between 10 to 25, represent the second largest consumer group behind millennials and nearly a fifth of all global luxury spending by 2025. In China, youth purchasing power is even stronger, as the average age of a luxury consumer is 28 years old. While existing wealthy youths are unlikely to be affected by unemployment, a large number of unemployed educated young people signals a huge loss for potential customers in the future. And for many luxury retailers, Gen Z’s absence spells a huge problem. In the past, lower ticket items such as designer sneakers and slides were considered good entry products into the luxury world, but brands like Burberry have already reported declining sales for those categories. Long term impact on the luxury market After two years of double-digit growth, a market with the magnitude of China was believed to be more resistant to an economic downturn. But the recent slump in luxury sales shows even high-net-worth individuals are unable to escape the clutches of inflation. Retail and luxury sector analyst at Intesa Sanpaolo bank, Francesca Diviccaro, said that “although there has been a lifting of the restrictions in recent months, accompanied by positive indicators, with a peak in sales in July and August, I believe that in the short term China may represent a threat and will also impact estimates for 2023. After double-digit growth in the last two years, next year we’ll be looking at a single-digit increase.” While China’s weakening demand has not had an immediate impact on this year’s revenue, luxury retailers should anticipate even slower sales as Chinese consumers become more cost-conscious. The bulk-buying behaviour that once buoyed many luxury brands is likely to fade, and retailers will not only be competing against one another, but also the secondhand market that is growing rapidly. However, Diviccaro claims retailers should not lose hope in China just yet. “The biggest luxury market in 2025 will be China, driven by the prosperity of the middle class, by the younger generation, but also by a recovery or a start of business in second-tier cities,” she said.