In Hong Kong, the sight of Chinese tourists lining up outside luxury brands like Hermès and Louis Vuitton is no longer something to marvel at. According to a new report compiled by HSBC, about a quarter of the world’s luxury purchases are now made by Chinese citizens.
The trend is a result of China’s burgeoning middle- and upper-classes following the country’s relatively recent economic maturation within the past two decades. Though there have been signs that China’s recent slowdown may be inspiring more value-conscious spending in Chinese consumers, this figure indicates that the retail market is still growing rapidly. In 2007, HSBC found that Chinese purchased just 5% of the world’s luxury goods. That’s a five-fold increase in as many years. And the bank’s analysts think there’s more to come.
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“We do not think China’s luxury sector is even close to being mature,” the recently released report states. “China remains above all a market where brands are recruiting customers rather than serving repeat ones.”
One of the factors cited for driving the growth is that luxury houses are now expanding and opening retail stores beyond just big cities like Beijing and Shanghai, and into smaller regional areas across the country. Many worldwide fashion brands are storming the market, too, increasingly their operational focus on Hong Kong, which often serves as a base for their Chinese operations.
Though Chinese nationals continue to account for a large proportion of luxury purchases, only about 10% of those sales are actually transacted in mainland China. The rest of the purchases are frequently made overseas in territories like Hong Kong and countries like Australia, where a booming influx of Chinese visitors routinely spend triple the amount compared to the average American tourist.
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Thanks to greater purchasing power abroad – due to usually lower import taxes and an appreciating yuan relative to other major currencies – Chinese citizens are frequently opting to buy goods from overseas rather than buying luxuries at home. Counterfeit goods are also a common concern within the country, driving Chinese consumers across foreign shores to ensure product quality and service.
Erica Ho is a contributor at TIME and the editor of Map Happy. Find her on Twitter at @ericamho and Google+. You can also continue the discussion on TIME’s Facebook page and on Twitter at @TIME.