The mainland is expected to become the world's fifth-largest luxury market, with the rate of growth well ahead of the largest market, the United States, where luxury spending is on pace for an 8 per cent increase.

Japan, the second-largest market, is likely to record a scant 2 per cent growth this year.

Bain partner Bruno Lannes predicted sales would continue to rise at a 'healthy pace' next year, though growth will slow from previous years.

'The China market is still supply driven,' said Lannes. 'New store openings create new demand.'

According to the report, spending by new customers will amount to 14.9 billion yuan this year, representing 63 per cent of the total luxury growth.

Watches were among the bright spots in 2011 as aggressive marketing strategies by various brands appeared to pay off. Sales of watches are set to jump 45 per cent from a year ago, up from a 12 per cent last year.

The Bain report found global brands were taking a cautious stance on further expansion on the mainland. Store openings among a select group of top luxury brands dropped to 90 this year from 160 last year.

'There are still a number of expansions, but the pace is slowing down as the brands want to focus on how to maintain their exclusive images,' said Lannes, adding that, 'more and more growth will come from same-store sales'.

212b yuan

Expected Chinese spending on luxury goods worldwide this year, in yuan, up 36 per cent from last year, according to Bain