What: Continued improvement in metro traffic data, which could be an indication of shopping mall traffic improvement, signals a fast-tracked recovery for China.

Why it is important: The world’s second largest luxury market is expected to grow by 19% in 2023  and travel retail will continue to recover according to Barclays

Traffic in major Chinese cities, such as Beijing and Shanghai, has almost returned to pre-COVID levels while Shenzen and Chengdu have significantly passed pre-pandemic levels already.

Travel retail is expected to return to normal as tourism is returning and excessive savings support consumers’ spending.

According to one of the largest luxury shopping mall operations in China, VIP customers had already resumed their spending abroad, but they expect more Chinese to travel during the year and buy luxury goods abroad. Around 15% of Chinese spending is expected to occur abroad this year.

Additionally, Chinese shoppers are ready to spend their COVID-19 savings, which reached 2.1 trillion euros in 2022.

Barclays suggests that Swatch Group could gain the most from China’s reopening as they had the greatest exposure to Chinese consumers before the pandemic, with 50% of sales from China. Richemont is also well positioned as they saw 40% of sales coming from China before the pandemic. Other brands mentioned include Cartier and Van Cleef & Arpels, as consumers may turn to watches and jewelry as an alternative asset that can hold value during inflationary times.

Traffic rebound signals fast-tracked China recovery