News / Economy

China Luxury Struts Despite Graft Crackdown, Slowing Economy

China's Luxury Sales Surge Amid Graft Crackdown, Slowing Economyi
X
September 24, 2013 2:53 PM
China is cracking down on government excess and corruption. Advertisements for luxury goods are banned and it’s riskier than ever for officials to flaunt their wealth. Even with the official focus on austerity and China’s slowing economy, however, Chinese demand for luxury goods continues.
China is cracking down on government excess and corruption. Advertisements for luxury goods are banned and it’s riskier than ever for officials to flaunt their wealth. But even with the official focus on austerity and China’s slowing economy, Chinese demand for luxury goods continues.

In the rich port city of Shanghai luxury shops are like convenience stores, there is one on almost every corner.  China is the world’s second largest market for luxury brands.  By 2015, McKinsey and Company estimates the country will account for more than 20 percent of the global luxury market.

Luxury industry analyst Pablo Mauron said that despite the challenges, he is still upbeat about the future.

Mauron, who is the general manager China of the Digital Luxury Group said that while there are some signals of slowing, overall luxury brands remain confident about China.

“They keep investing massively in China, opening new stores. In Shanghai, we have new malls, new luxury malls opening every month almost,” Mauron said.

After years of breakneck expansion, China’s economic growth is hovering around 7.5 percent.  While that’s not bad and a level many countries would envy, it’s a sharp change in China after years of annual growth around and above 10 percent.

'Brother watch' effect

Embarrassed by corruption scandals that have highlighted the privilege of China’s ruling Communist Party elite, the government has banned lavish banquets, gift giving and ostentatious displays of wealth.

Yang Dacai - the former Chinese official who also is known as “brother watch” - was sentenced to 14 years in prison earlier this month. Yang’s corruption was exposed when a blogger noticed that he frequently wore expensive luxury watches and asked how he could afford the flashy timepieces on a civil servant's salary.

In late August, China announced it was expanding consumption taxes on even more luxury goods.

While these things could spell trouble for high-end retailers, Mauron said companies so far are not worried, and remain focused on the traditional challenges of luxury brands.

“The key challenge, no matter what the context, around some controversy over gifting with corruption or problems, issues with the taxes, I think the main challenge is still the same,” Mauron said. “Which is how to boost the local consumption and how to find some reasons to buy locally when the consumers know it is more expensive.”

Affordable luxury

Luxury goods are even more expensive in China than overseas, because of high import and consumption taxes. That has led many Chinese to shop abroad in Europe and the United States in search of better deals.

Such savvy shoppers are part of China’s growing “affordable luxury” sector. Ken Grant, the head of FDKG Insight, said the sector is one that brands are finding new ways to reach.

"Luxury brands are all trying very hard to find new customers, which means they need to innovate in what they do, they need to introduce new products,” said Grant who is the head of FDKG Insight. “Perhaps products that they did not traditionally have, they are expanding their lines and maybe introducing some lower price point products to attract new consumers.”

First lady's influence

Demand is also growing for China’s own luxury goods. The wife of Chinese President Xi Jinping has helped boost interest in high-end Chinese fashion by wearing only locally designed brands on her trips overseas.

French luxury and retail group Kering has put its backing behind the jewelry company Qeelin. The brand combines Chinese culture with French craftsmanship. Chinese brand Shang Xia mixes modern design with Chinese culture, and its biggest investor is French luxury brand Hermes.

Without such backing, it is far more difficult for local brands to compete, Grant said. “They need to be around long enough and their challenge is whether they’ve got the stamina to do that or whether the people who invest the money are willing to invest for a long time,” he said.

Many traditional luxury brands took decades to establish their reputation. According to a recent survey, the World Luxury Index China 2013, of the most sought after luxury products in China, only one Chinese brand was among the top 50. That jewelry brand, Chow Tai Fook, was founded in China back in 1929.

You May Like

UN Ambassador Power Highlights Plight of Women Prisoners

She launches the 'Free the 20' campaign, aimed at profiling women being deprived of their freedom around the world More

Satellite Launch Sparks Spectacular Light Show

A slight delay in a satellite launch lit up the Florida sky early this morning More

Fleeing IS Killings in Syria, Family Reaches Bavaria

Exhausted, scared and under-nourished, Khalil and Maha's tale mirrors those of thousands of refugees from war-torn countries who have left their homes in the hopes of finding a better life More

This forum has been closed.
Comments
     
There are no comments in this forum. Be first and add one

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Nobel Prize Winner Malala Talks to VOAi
X
August 31, 2015 2:17 AM
Nobel Peace Prize winner Malala Yousafzai met with VOA's Deewa service in Washington Sunday to talk about women’s rights and unveil a trailer for her new documentary. VOA's Katherine Gypson has more.
Video

Video Nobel Prize Winner Malala Talks to VOA

Nobel Peace Prize winner Malala Yousafzai met with VOA's Deewa service in Washington Sunday to talk about women’s rights and unveil a trailer for her new documentary. VOA's Katherine Gypson has more.
Video

Video War, Drought Threaten Iraq's Marshlands

Iraq's southern wetlands are in crisis. These areas are the spawning ground for Gulf fisheries, a resting place for migrating wildfowl, and source of livelihood for fishermen and herders. Faith Lapidus has more.
Video

Video Colombians Flee Venezuela as Border Crisis Escalates

Hundreds of Colombians have fled Venezuela since last week, amid an escalating border crisis between the two countries. Last week, Venezuelan President Nicolas Maduro ordered the closure of a key border crossing after smugglers injured three Venezuelan soldiers and a civilian. The president also ordered the deportation of Colombians who are in Venezuela illegally. Zlatica Hoke reports.
Video

Video Rebuilding New Orleans' Music Scene

Ten years after Hurricane Katrina inundated New Orleans, threatening to wash away its vibrant musical heritage along with its neighborhoods, the beat goes on. As Bronwyn Benito and Faith Lapidus report, a Musicians' Village is preserving the city's unique sound.
Video

Video In Russia, Auto Industry in Tailspin

Industry insiders say country relies too heavily on imports as inflation cuts too many consumers out of the market. Daniel Schearf has more from Moscow.
Video

Video Scientist Calls Use of Fetal Tissue in Medical Research Essential

An anti-abortion group responsible for secret recordings of workers at a women's health care organization claims the workers shown are offering baby parts for sale, a charge the organization strongly denies. While the selling of fetal tissue is against the law in the United States, abortion and the use of donated fetal tissue for medical research are both legal. VOA’s Julie Taboh reports.
Video

Video Next to Iran, Climate at Forefront of Obama Agenda

President Barack Obama this week announced new initiatives aimed at making it easier for Americans to access renewable energy sources such as solar and wind. Obama is not slowing down when it comes to pushing through climate change measures, an issue he says is the greatest threat to the country’s national security. VOA correspondent Aru Pande has more from the White House.
Video

Video Arctic Draws International Competition for Oil

A new geopolitical “Great Game” is underway in earth’s northernmost region, the Arctic, where Russia has claimed a large area for resource development and President Barack Obama recently approved Shell Oil Company’s test-drilling project in an area under U.S. control. Greg Flakus reports.
Video

Video Philippine Maritime Police: Chinese Fishermen a Threat to Country’s Security

China and the Philippines both claim maritime rights in the South China Sea.  That includes the right to fish in those waters. Jason Strother reports on how the Philippines is catching Chinese nationals it says are illegal poachers. He has the story from Palawan province.
Video

Video China's Spratly Island Building Said to Light Up the Night 'Like A City'

Southeast Asian countries claim China has illegally seized territory in the Spratly islands. It is especially a concern for a Philippine mayor who says Beijing is occupying parts of his municipality. Jason Strother reports from the capital of Palawan province, Puerto Princesa.
Video

Video Ages-old Ice Reveals Secrets of Climate Change

Ice caps don't just exist at the world's poles. There are also tropical ice caps, and the largest sits atop the Peruvian Andes - but it is melting, quickly, and may be gone within the next 20 years. George Putic reports scientists are now rushing to take samples to get at the valuable information about climate change locked in the ice.

VOA Blogs

World Currencies

EUR
USD
0.8916
JPY
USD
121.32
GBP
USD
0.6487
CAD
USD
1.3252
INR
USD
66.401

Rates may not be current.