According to a report by consultancy Bain & Co, Chinese shoppers now do about two-thirds of their luxury shopping abroad. The government campaign encouraging frugality has also had a huge impact on gift-giving, which was one of the major growth engines for the luxury sector. [Photo provided to China Daily]

China's luxury goods market has slowed from 7 percent growth in 2012 to around 2 percent in 2013, with expectations of similarly slow growth in 2014, according to the China Luxury Goods Market Study by consultancy Bain & Co.

Related: Foreign retailers learning how to click with Chinese fashionistas

Chinese shoppers now do about two-thirds of their luxury shopping abroad, which has triggered a slowdown in domestic store traffic and store openings, the report said.

The Chinese are still the largest nationality of luxury buyers worldwide, with purchases making up 29 percent of the global market, a 4 percentage point increase over last year.

At the same time, consumption in China has shifted, with women's categories becoming more prominent, indicating a growing sophistication of Chinese customers.

These shifts are a continuation of trends that began at the end of 2012, and are creating new imperatives for brands as they retool their China operations, from pricing to customer relations to fashion content.

Several factors have generated the cooling of China's previously exuberant luxury market, according to the study. The highly visible government campaign encouraging frugality and focusing on corruption has had a huge impact on gift-giving, which was one of the major growth engines for the sector.

The campaign has especially constrained the growth of luxury watches and men's categories.

Watches make up more than one-fifth of the total domestic luxury market, and sales declined by 11 percent in 2013.

The shift of menswear from being a growth category in prior years to a slightly declining one in 2013 was also attributed to the reduction in gifting.