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China luxury sales fall as offshore wealth tax crackdown weighs on VIPs
Sales at the 25 biggest luxury labels in China fell more than 10% in July, and the slump is tied to tighter controls meant to curb capital outflows and raise taxes on offshore assets.
Global luxury brands are seeing a deeper downturn in China as Beijing steps up efforts to tax offshore wealth, dampening spending by the country’s richest consumers, LiveMint Markets reports. According to Bloomberg research firms surveyed by LiveMint Markets, sales at the 25 biggest luxury labels in China dropped more than 10% in July, a worse result than the June slowdown and a sharp reversal from the brisk momentum seen earlier in the year. LVMH’s Louis Vuitton and Dior, as well as Kering SA’s Gucci, Bottega Veneta and Balenciaga, recorded double-digit sales declines, while Hermès swung from gains to declines. The firms also said growth for Chanel and Prada decelerated significantly.
The luxury slump comes as China’s campaign to stem capital outflows and reclaim tax revenues intensifies, including tighter controls on cross-border stock trading and demands for citizens to pay billions of dollars in levies on offshore assets and investment gains. LiveMint Markets notes the measures are likely to be eroding the “wealth effect” that had supported a luxury recovery that began less than a year ago amid an AI-fueled stock market boom.
Jacques Roizen, co-founder of Shanghai-based consultancy Foresight Performance Partners, said operators are seeing more caution among VIP clients due to waning wealth effects and a tighter tax environment for high-income consumers. The story also ties the crackdown to market pressure, saying it has contributed to erasing last year’s 28.3% rally in the MSCI China Index, which is down 8.9% this year, while Hong Kong’s Hang Seng Index has also lost steam.
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