The Chinese culture is one that differs quite a bit from western culture. To the "layman from the west", one might view China as a place that produces cheap products, or a place that does not hold that high of an esteem compared with its neighboring countries, Japan and Korea. And while China has a much richer culture and heritage than it gets credit for, from a strategic standpoint, those in the business know that the Chinese market presents opportunities across multiple industries - manufacturing, consumer goods, services, etc. It is true that the global market dynamics might shift in the coming years, but China nevertheless is still a significant player in the game. Compared to countries like India, what has given luxury brands the kind of leverage they have in China?
On the Micro Level
One of the reasons behind this is that in China, the idea of personal success is closely associated with the accumulation of wealth and status. It is embedded in their culture. One noticeable example of this trait can be seen in Chinese New Year celebrations, the most important holiday in the Chinese calender. Wishes of health and wealth are aplenty during this time. A lot of the visual imagery and auspicious rituals also correspond to the idea of accumulating prosperity. And when wealth does accumulate, what happens?
It's interesting how the general perception of wealth is more extroverted than introverted, and luxury products feed that perception, providing a tangible way for one to express their status and wealth. While commitment to invest in a nice house or an expensive car is often out of reach for the middle class, a handbag is something that is attainable while still carrying the association of a certain social status. Hence, luxury fashion goods present to the masses an attainable status of wealth. Also, Chinese consumers want the real deal when it comes to luxury goods, conveniently feigning off imitation brands and funneling income into legitimate luxury brands. Luxury services, like spas and wellness activities are also on the rise, perhaps a reflection of the direction product design in general is heading, where services and digital experiences take center place over physical products.