China is set to become the world's second biggest market for luxury goods after the United States in five years, overtaking France, Britain, Italy and Japan, an industry report said Tuesday.

Developed countries still dominate the personal luxury market but economic woes are reducing demand while rising middle classes in emerging economies take up the slack, consumer research group Euromonitor said.

Related reading: Niche high-end products beat established brands

                          Caution over luxury item spending amid economic woes

Luxury-goods sales could top $302 billion worldwide this year, up 4.0 percent from 2011, as buyers from developing nations snap up designer handbags, clothes, jewelry, watches, fine wine, champagne and spirits, it said.

"Benefitting from a fast-growing middle class and a fast-developing luxury distribution network, sales of luxury goods in China have consistently outperformed the global market," Euromonitor said.

Japan is currently the world's second biggest market for luxury goods but its share has been shrinking as the country struggles with economic problems.

Demand for luxury goods has been lackluster this year in developed Western markets and Japan due to rising prices and mounting insecurity over jobs and pensions, Euromonitor said.

However, emerging markets led by the BRIC grouping - Brazil, Russia, India and China - are making up for the shortfall.

The BRIC countries will account for 11 percent of total luxury sales with a combined retail value of over $33 billion this year, up from only 4.0 percent in 2007, it said.

This is forecast to rise to $59 billion, or 16 percent of global sales, by 2017.

The world's four biggest luxury goods markets - the United States, Japan, Italy and France - still accounted for almost half the value in sales this year, the report said.

Designer apparel are expected to remain the best-selling items, accounting for 42 percent of total luxury goods revenue by 2017, but jewelry and timepieces are fast gaining popularity, it said.

While China's importance to luxury goods makers has soared in recent years, signs have emerged of demand growth easing.

Last month saw shares in luxury clothing and accessories group Burberry tumble after the British firm issued a surprise profit warning which analysts blamed on China's economic slowdown.