BEIJING — Chinese consumers are spending more on luxury goods at home, even if they can’t easily travel abroad due to pandemic-related restrictions, consultancy Bain & Company said in its annual report on the luxury sector.

Bain released its estimates Thursday, which showed that sales of personal luxury items in China increased 36% to 471billion yuan ($73.59 Billion) by 2021 compared with the year before. It’s almost double what was spent in luxury goods on the mainland last year, when it reached 234 billion Yuan.

Even though Chinese retail sales have been declining since 2020, luxury goods sales are on the rise. This data also shows the rise of China as an international destination market.

Bain estimates that China’s share in the world luxury market grew to approximately 21% in 2021 from around 20% in 2020.

“We anticipate this growth to continue, putting the country on track to become the world’s largest luxury goods market by 2025 — regardless of future international travel patterns,” the report said.

Bain analysts stated that China is still the most consumer-friendly country in the world, due to its growing middle class. “The average growth in disposable income continues to be higher than inflation.”

According to the report, leather goods sales rose by approximately 60%. This was followed closely by a roughly 40% rise in fashion and lifestyle.

Before the pandemic, travel restrictions were a barrier to shoppers traveling abroad. luxury brands were already moving to Hainan and other parts of mainland China from Hong Kongbecause of violent protests within the semi-autonomous area.

Sales of luxury goods at Hainan’s duty-free stores posted annual growth of 85% in 2021 — reaching 60 billion yuan — following a 122% year-on-year increase in 2020, according to Bain. They accounted for 13.3% of the personal luxury goods market in mainland China last year, up from 9.9% in 2020 and 6.6% in previous years.

Bain analysts stated that Hainan’s success in duty-free shopping was due to the fact that it offered steep discounts, which went well beyond tax savings. According to the report, slowing growth in sales channels (at least for certain products) was caused by the “significant price difference” between Hainan’s official price and Hainan’s.

The Economist Intelligence Unit analysts expect China’s domestic duty-free markets to quadruple between 2021-2025 to close to 258 billion Yuan. This will be achieved through new government policies and the opening of duty-free shops in key Chinese cities such as Beijing, Tianjin, and Shanghai.

The analysts stated that this was contingent on China lifting restrictions on international travel, and duty-free purchasing quotas.

According to them, “The duty-free Hainan market is still in the lagging position on product ranges as well as price competitionness, especially for middle-to-high end products.” Chinese shoppers may choose to shop overseas and experience different cultures and environments.

The decline in luxury spending was indicative of a slump in Chinese consumption over the six-month period. Retail sales increased by an average of 5% disappointing 1.7% year-on-year in December.

Bain analysts predict that the luxury domestic market will grow more slowly in 2022, as they look ahead.

The analysts stated, “Sporadic Covid-19-related outbreaks are likely to continue throughout the year.” “We anticipate a similar negative impact on the shopping-mall traffic of affected cities.”

To stop coronavirus epidemics spreading, local authorities quickly locked down areas and restricted travel. This policy is designed to discourage individuals from traveling to areas where they may come in contact with confirmed cases or who are at risk of being quarantined due to overlapping travel histories.

According to extensive travel records provided by the municipal authorities, one such case was found in Beijing.