Is China finally recovering? In the first half of 2025, China's GDP increased by 5.1 percent

The news the entire luxury sector had been waiting for over a year has finally arrived: China is growing again. According to the National Bureau of Statistics, in the first half of 2025, China’s GDP increased by 5.1% compared to the same period the previous year, confirming a recovery phase that could represent a decisive turning point for the luxury sector, which has been struggling since the end of 2023. China's recovery is mainly based on two key pillars: on one side, the gradual recovery of domestic consumption, and on the other, the export sector, with the easing of the trade war, which, although still present, has led to agreements on the exchange of raw materials. At the same time, the domestic market shows encouraging, though still mixed, signals. Retail sales, driven mainly by online commerce, grew by 5% in the first six months of the year, with categories such as household appliances and tech products showing clear improvement. Some traditionally strong sectors like apparel and cosmetics did not grow at the same pace, recording more modest increases. So, while it’s no longer a deep red scenario as in past months, it’s also unrealistic to expect major luxury conglomerates to immediately return to their former revenue levels. So, are we witnessing the dawn of a new day for the fashion industry, or is it just a mirage?

To answer, we need to look beyond surface numbers. According to WWD, the result is largely tied to the so-called “front-loading” of exports, with advance orders from foreign companies, encouraged by the basic agreement between the United States and China on rare earths and semiconductors. The Federal Reserve (the U.S. central bank) confirmed that, although the excessive smoothness of Chinese data has decreased compared to past years, the growth model remains unbalanced. What weighs on it is not just geopolitical uncertainty, but also deflationary pressures and a domestic demand that has not yet fully consolidated. It is within this context that the Chinese government’s decision to sell part of its U.S. Treasuries last June, reported by Think China, comes into play: a move more political than economic, interpreted as a signal of the will to reduce financial exposure to the United States. Despite this, the direct impact on the domestic market appears limited. Beijing’s priority seems to remain building a stronger recovery less dependent on exports, focusing on sustained growth in citizens’ purchasing power and stabilizing internal markets.

Further worsening the luxury recovery scenario is consumer behavior, which has remained largely unchanged over the past year: a growing protectionist-like trend sees both loyal and aspirational customers moving away from major international luxury Maisons in favor of local and Made in China brands, now perceived as closer, more authentic, and accessible. This shift, already visible in retail sales data, reflects not only an economic but also a cultural change, linked to the desire to consolidate a consumption identity less dependent on the import of Western goods. As highlighted by Lynn Song, Chief Economist at ING, «Even though consumers are responding to price incentives in the form of trade-in policies, there remains a general sense of caution in expanding discretionary spending. Stabilizing asset prices and restoring wage growth remain important milestones for a more sustainable recovery of confidence.» In other words, without a concrete improvement in purchasing power and without clear signals of economic stability, the great luxury boom might not return to pre-crisis levels, leaving room for an even more fragmented market and even more negative balance sheets. Time will tell what the second quarter results will reveal.