A Chinese consumer walks in a shopping mall in Beijing, China, 16 November 2018. China's consumer price index (CPI), a main gauge of inflation, rose 2.5 percent year-on-year in October, according to the National Bureau of Statistics (NBS).China economy consumption, Beijing - 16 Nov 2018

The trade war between the U.S. and China has fueled concerns over the spending power of the Chinese consumer, but luxury retailers should fear not, according to HSBC.

A report by the investment bank predicts that a revival in Chinese consumption will once again help boost the global luxury sector, with Kering, Swatch, Richemont, SMCP and Burberry among the high-end retailers who stand to benefit.

The comeback has in part been driven by a strong RMB relative to currencies in countries where luxury consumption happens.

“The stronger RMB bodes well for luxury consumption outside of China, as Chinese consumers tend to shop after the weaker currency,” Erwan Rambourg, global co-head of consumer and retail research at HSBC, said.

“We think that both the fashion trends and the proximity make countries like Japan appealing to our Chinese tourists, but as we’ve seen in our China Deluxe surveys, France and other countries in Europe are always high on the aspirational destinations list.”

Other supportive factors include the easing of visas in many destinations, which makes it easier for Chinese tourists to travel, although HSBC thinks that the action will happen more in Asia than in Europe due to security concerns, and the U.S. because of cost concerns.

But while other countries will benefit from the Chinese consumer this year, HSBC predicts that China will also profit in the longer term as key structural factors that discouraged luxury consumption there in the past are resolving.

This includes the harmonization of prices, which makes shopping abroad less appealing as the prices normalize; the continued development of e-commerce in China, which facilitates easier shopping experiences; and investments in infrastructure and travel retail, which encourage shopping at home.

As these shifts continue to play out, the results will soon be visible in the data. A few years ago, 75 percent of Chinese luxury sales happened outside of China, but that is expected to move to 50-50 either this year or next.

What’s more, HSBC expects China to grow at twice the rate of the rest of the global luxury industry in 2019, 12 percent vs. 6 percent, respectively.

“We used to describe luxury stores in China as being empty showrooms in which consumers browsed and ended up buying products abroad. Today, stores have gained tremendously in traffic and conversion,” added Rambourg.