The price premium of luxury goods in China over those in Europe has shrunk by a quarter in the past year — a trend that is driving up domestic luxury spending on the mainland.

Chinese consumers are responsible for about a third of all luxury sales worldwide, making them a crucial target of high-end brands. But they have historically made most of their purchases outside the Chinese mainland, with Paris their most popular European destination, because of high import taxes and price premiums charged by brands in the country. 

Those premiums have eroded over the past year, according to a survey of the prices of nearly 2,000 luxury goods by consultancy Deloitte. Luxury goods on average are now 32 per cent more expensive than identical items in France — the largest market in the $225bn global luxury sector and a good baseline for European prices, says Deloitte — compared with 41 per cent a year ago.