China’s luxury market contracted 10 percent in 2022 on the year, snapping a five-year streak of high growth, as Beijing’s zero-Covid policy and a slowing economy hit spending, Bain & Company said in a report on Tuesday.

The luxury market grew 42 percent annually between 2019 and 2021 but its fortunes changed in 2022, after China doubled down on stamping out Covid-19 with city-wide lockdowns and a regulatory crackdown hit the property sector and fueled unemployment.

The figure compared to growth of 1 percent between 2012 and 2016, and a 26 percent increase in sales between 2016 and 2019, Bain said.

Mirroring recent results from the likes of French luxury goods group LVMH and Italy’s Salvatore Ferragamo for 2022, Bain said all luxury categories were affected to varying degrees during the year.

While categories with high online penetration, such as luxury beauty, suffered single-digit declines, the watch market fell the most, with sales dropping 20 percent to 25 percent from 2021.

Fashion and lifestyle experienced a decline of 15 percent to 20 percent, while sales of jewellery and leather goods contracted 10 percent to 15 percent.

But Beijing’s decision to dismantle the zero-Covid policy in early December is likely to bring back growth this year as mall traffic improves and consumer sentiment rebounds, Bain said.

“We expect to see 2021 sales levels sometime between the first and second half of 2023,” said Weiwei Xing, a Hong Kong-based partner at Bain & Company.

“While optimism abounds, there are also risks. Brands need to resolve pricing gaps between China and Europe before international travel resumes,” she said.

By Sophie Yu and Brenda Goh; Editor: Clarence Fernandez

Learn more:

Luxury Set for a ‘Bumpy Ride’ in China

Beijing’s Covid-19 policy shift will give the sector a boost in 2023 but a surge in infections and sluggish economic growth could dampen the recovery after an uplift from Chinese New Year.