The signs first appeared in the Spring, with some disappointing wine auctions. It then spread to bigger ticket items: jets, yachts and fine art. Overall, auction sales this spring fell 43 percent compared to the fall of 2011.

Weak demand is also showing up in prices. The Chinese luxury CPI, which tracks prices for everything from there hes to G550 jets to Zegna suits and Patek Philippe watches, is now growing at about half the rate of 2011. The price of golf villa in Shanghai have fallen 7 percent this year, to $3 million. (Read more: China's Art Bubble May Be Popping )

Some of this is due to a slowing economy in China and the end of stimulus. But it’s also due to a broader backlash against luxury and the wealthy in Chinese society and government. The Chinese word for “luxury” is discouraged on billboards.

A blogger using the name Huazong has become a web sensation by the tracking the luxury watches worn by government officials making modest official salaries. He tracked watches for 2300 officials last year.

A “discipline inspection commission” is investigating the assets of a government official who was shown online to be wearing – at various times -- five different luxury watches, even though is official salary was less than $1,500 a month.

When luxury can get you investigated, it may be time to rethink the Chinese luxury boom.

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