Last spring I sat in a meeting room on the twenty-second floor of a tower in Jing’an, watching a European finance director draw a line across a whiteboard. On the left he wrote Paris. On the right he wrote Shanghai. Then he asked the question I have now heard, in one form or another, something like forty times: “So what premium can we take here?”
It is the wrong question.
The right one is narrower and a lot less comfortable. Not how much can you charge in China, but how far can your Shanghai price drift from your Paris price before a Chinese customer decides she is being treated as the mark. That distance is not really a margin decision. It is a trust decision, and I have watched that distance shrink through every planning cycle since I moved brand-side.
Bain says the gap already closed, and that this is why people stopped flying to buy
Bain’s 2025 China Personal Luxury Report, released on 29 January 2026, puts mainland personal luxury sales down 3 to 5 percent across 2025, with the first signs of recovery arriving in the third quarter. Sixty-five percent of Chinese luxury spending happened inside the mainland that year, thirty-five percent abroad. Bain names one of the reasons for that repatriation directly: price gaps between the mainland and the other major markets narrowed, which removed much of the incentive to shop on holiday.
Read that sentence again if you are still building a China P&L around a China premium.
The premium was never the profit engine. It was the thing sending your customer to a department store in the eighth arrondissement, where she bought from a sales assistant who did not know her name, on a transaction your China team could not see, count, or serve afterwards. You paid for that in customer data and in second purchases. The finance line looked fine.
The category split in the same Bain report is the part I would print and pin above the desk. Beauty and personal care grew 4 to 7 percent in 2025. Fashion fell 5 to 8 percent. Leather goods fell 8 to 11 percent. Watches fell 14 to 17 percent. Jewellery landed somewhere between flat and minus 5. And Bain attributes the leather goods drop partly to past and continuing price increases combined with limited product newness, which made the purchase decision harder for the consumer.
That is a polite way of saying what I will say less politely. If you raised the price of a bag three times in four years and the bag did not change, Chinese buyers noticed, and a good number of them simply stopped.
Hermès raises 5 to 6 percent and explains why, which is the part most brands skip
On the full-year results call of 12 February 2026, Axel Dumas said Hermès was “between 5%-6% of a price increase for 2026.” His finance director, Eric du Halgouët, added the reason on the same call: the increases were calibrated to cover production costs, including the price of gold and a bonus paid to the group’s French staff.
The number is not what interests me. The sentence attached to it is.
A price increase tied to a cost you can name survives a comment thread. A price increase tied to “brand positioning” does not, because positioning is not a cost, it is a wish, and Chinese consumers have become very good at spotting the difference. I have watched this go both ways. At Guerlain I learned something that took me an embarrassingly long time to see: the memo that set the price and the memo that explained the price were written by two different teams who never spoke to each other, in that order, six weeks apart. By the time communications got the number, the number was already circulating on WeChat with someone else’s explanation attached to it.
What I cannot tell you, and why nobody honest can
You will find plenty of articles offering a neat table of the same handbag in Paris, Tokyo, Shanghai and Hainan, with a tidy percentage gap at the end of each row. I am not going to give you one.
There is no reliable public dataset of current cross-market retail prices by reference. Boutique price lists move several times a year, brand sites in China do not archive their own history, and the comparison figures circulating on Chinese finance aggregators are almost all unsourced content-farm output, frequently recycling numbers from two seasons ago. I checked several while preparing this piece. Not one carried a date and a source I could stand behind. The Tokyo comparisons are worse still, because the yen has moved enough that a gap measured in January means nothing by June.
So build your own. Ten references, four markets, checked from official channels on the same day each month, recorded with the exchange rate used. It takes an intern half a day a month and it is the only version of this table I would let a pricing committee see.
Hainan is your second China price, whether you set it deliberately or not
On 16 October 2025 the Ministry of Finance, the General Administration of Customs and the State Taxation Administration issued announcement No. 9 of 2025, revising the Hainan offshore duty-free rules with effect from 1 November 2025.
| Rule | Before 1 Nov 2025 | From 1 Nov 2025 |
|---|---|---|
| Product categories | 45 | 47, adding pet supplies and portable musical instruments |
| Annual duty-free allowance | 100,000 yuan | 100,000 yuan, now also counting purchases by departing travellers |
| Minimum age | 16 | 18 |
| Trips per year | Capped | Uncapped for island residents leaving once a year |
| Domestic goods in duty-free stores | Not permitted | Clothing, footwear, ceramics, silk scarves, coffee and tea admitted with VAT and consumption tax refunded |
The volume that followed is not small. Securities Times reported on 11 May 2026 that customs supervised 22.22 billion yuan of offshore duty-free purchases between the policy start and 30 April 2026, up 22.6 percent year on year, across 2.973 million shopper visits. Xinhua then reported on 8 July 2026 that the first half of 2026 alone reached 19.92 billion yuan, up 18.8 percent, from 2.793 million shopper visits, up 12.6 percent, on 15.97 million items, up only 7.3 percent.
Value grew more than twice as fast as unit count. People are buying fewer, more expensive things there. If your brand sits in Hainan without an explicit price position, the island is quietly setting your floor for you and your Tier 1 boutiques are absorbing the consequence.
The arbitrage is now a criminal matter, and the courts have published the arithmetic
Shanghai Observer reported on 11 December 2025 on a case worth knowing. Three people, referred to in the report as Zuo, Zuo and Liu, used their own Hainan duty-free allowances and those of recruited proxy buyers to purchase goods on the island, shipped them through Guangdong, and resold them inland at a markup. Prosecutors charged them in May 2025 with smuggling ordinary goods. The evaded duty came to 1.41 million, 1.53 million and 1.35 million yuan respectively. They received between two years and three months and three years in prison, plus fines of 550,000 to 1 million yuan each.
The threshold under Article 153 of the Criminal Law is 100,000 yuan of evaded duty. That is not a large bag collection.
Enforcement of this kind handles the industrial operators. It does nothing about the woman in a 200-member WeChat group who brings back four bags a year for her friends, and it never will. That one is handled by your price or by nothing.
A client I cannot name, and the 40,000 yuan of first-year revenue we chose not to chase
A mid-size French leather goods house, family owned, opening its first real China presence. The plan arriving from Paris had the China retail price at roughly 12 percent above the converted euro price, which their board considered modest.
Before the pricing meeting we ran a search of their brand name on Xiaohongshu. Four of the top ten posts were price comparison posts, written by people who had already been to the Paris store. The brand had no boutique in China yet and its pricing was already a public conversation it was not part of.
We landed at parity plus the actual tax and operating difference, a little under 6 percent, and we wrote the one-sentence explanation of that 6 percent into the store script and the customer service replies before opening day. Year one revenue came in slightly under the number the CFO had modelled, by something like 40,000 yuan against a plan I am not going to quote. Price complaints and price-driven returns were close to zero, and the brand still owns the conversation about its own prices.
I think we were right. I get a polite argument about it every planning cycle, and I have not won it permanently.
Four things I would put in your next pricing meeting
Set the China price from cost, duty and VAT, then stop adding. Write the sentence that explains the number, in Chinese, before the price goes live rather than six weeks after. Give Hainan a deliberate position instead of discovering it. And rebuild the whole comparison every quarter from your own monthly checks, never from a table you found online, including any table you find in an article like this one.
None of this is a pricing model, and I would be suspicious of anyone who hands you one for China. It is a discipline about what you are willing to be asked in public. If you want a second opinion on a number before it goes to your board, our luxury team in Shanghai looks at these most weeks, and you can simply write to us.
Cindy Zhang is CEO of Fashion China Agency. She spent fifteen years in Chinese fashion and luxury, as chief editorial and PR officer at Vogue China, then brand-side with Guerlain, then in the luxury segment at Xiaohongshu.