LVMH Chairman and CEO Bernard Arnault Visits China Following Luxury Spending Rebound

Renowned entrepreneur Bernard Arnault, the owner of LVMH (LVMHF), has embarked on his inaugural visit to China since the relaxation of stringent Covid restrictions in the country. This visit comes on the heels of a substantial increase in sales for his company, driven by a rapid resurgence in Chinese spending on luxury goods.

Arnault, a French billionaire, is the latest in a series of prominent business leaders to journey to China, following visits by Tesla (TSLA) CEO Elon Musk and JP Morgan (JPM) CEO Jamie Dimon last month. Beijing has actively engaged global CEOs in an effort to rejuvenate business confidence and to promote a separation between Western businesses and government policies concerning China.

Reports from state media indicate that Arnault was seen at several shopping malls in downtown Beijing on Tuesday. He was observed inspecting various brand stores owned by LVMH, including Christian Dior and Bulgari, located in the WF Central and SKP malls. These observations were corroborated by photos shared on Chinese social media platforms.

LVMH did not immediately respond to a CNN request for comment.

LVMH reported a significant 17% increase in its first-quarter sales compared to the previous year, surpassing analyst expectations. This surge was primarily attributed to the recovery of China’s luxury market, which had experienced a decline during the pandemic.

According to the company’s Chief Financial Officer, Jean-Jacques Guiony, consumers have been returning to the company’s physical stores, and online sales have been on the rise. He expressed optimism about the market’s normalization, anticipating a strong push from mainland China in 2023.

China officially abandoned its strict zero-Covid policy in December, leading to a burst in consumer activity after three years of intermittent lockdowns. Luxury goods spending rebounded faster than any other sector in the first quarter.

While the economic momentum has slightly slowed in recent months, luxury goods sales have continued to accelerate. Government statistics released this month revealed that retail sales of jewelry, gold, and silver surged by 19.5% in the first five months of 2023 compared to the previous year, marking the most significant increase among all categories of goods.

Before the Covid outbreak, China was one of the world’s largest luxury goods markets. According to Bain & Co., Chinese consumer spending accounted for approximately 17% of the global luxury market in 2022, down from 35% in 2019. However, the firm predicts a resurgence this year, driven by robust local consumer demand and China’s post-Covid recovery, as it boasts a growing number of middle- and high-income consumers.

Charm Offensive

Arnault’s visit to China coincides with Beijing’s efforts to court global CEOs, addressing concerns about unfriendly policies toward foreign capital. Recent actions, including Chinese authorities raiding foreign consultancies, have left Western companies uncertain about their future in the country. This deteriorating sentiment has contributed to China’s economic challenges, including a decline in private-sector investment and rising unemployment.

Last month, Elon Musk made his first visit to China in three years, meeting with senior officials who encouraged him to expand investments and operations in the country. Chinese leaders are also advocating for a division between businesses and governments on their China policies to counteract Western nations’ attempts to “de-risk” from the Chinese economy.

During a World Economic Forum event, Chinese Premier Li Qiang stated that decisions regarding “de-risking” should be left to companies rather than governments. He emphasized that such concepts are misleading and that businesses are in the best position to assess and address risks. Li encouraged governments and relevant organizations not to overreach in these matters.