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.
William Ide
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

Photogallery Oxfam: Ebola Could Be 'Disaster of Our Generation'

Meanwhile, Fidel Castro, the former leader of Cuba, says the Caribbean island nation will 'gladly cooperate' with the US in the fight against Ebola in West Africa More

Multimedia Kobani Fighting Sends 400,000 Refugees to Turkey

Refugees receive help from Turkish authorities and individuals, but say much more is needed More

India’s Ruling Nationalist Party Makes Gains in Regional Elections

Bharatiya Janata Party’s huge margin over its rivals puts it on course to form governments in the northern Haryana and western Maharashtra states 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.
Exclusive: American Joins Kurds' Anti-IS Fighti
X
Zana Omer
October 18, 2014 6:37 PM
The United States and other Western nations have expressed alarm about their citizens joining Islamic State forces in Syria and Iraq. In a rare counterpoint to the phenomenon, an American has taken up arms with the militants' Syrian Kurdish opponents. Elizabeth Arrott has more in this exclusive profile by VOA Kurdish reporter Zana Omer in Ras al Ayn, Syria.
Video

Video Exclusive: American Joins Kurds' Anti-IS Fight

The United States and other Western nations have expressed alarm about their citizens joining Islamic State forces in Syria and Iraq. In a rare counterpoint to the phenomenon, an American has taken up arms with the militants' Syrian Kurdish opponents. Elizabeth Arrott has more in this exclusive profile by VOA Kurdish reporter Zana Omer in Ras al Ayn, Syria.
Video

Video South Korea Confronts Violence Within Military Ranks

Every able-bodied South Korean male between 18 and 35 must serve for 21 to 36 months in the country’s armed forces, depending upon the specific branch. For many, service is a rite of passage to manhood. But there are growing concerns that bullying and violence come along with the tradition. Reporter Jason Strother has more from Seoul.
Video

Video Comanche People Maintain Pride in Their Heritage

The Comanche (Indian nation) once were called the “Lords of the Plains,” with an empire that included half the land area of current day Texas, large parts of Oklahoma, New Mexico, Kansas and Colorado.The fierceness and battle prowess of these warriors on horseback delayed the settlement of most of West Texas for four decades. VOA’s Greg Flakus reports from Lawton, Oklahoma, that while their warrior days are over, the 15,000 members of the Comanche Nation remain a proud people.
Video

Video Turkey Campus Attacks Raise Islamic Radicalization Fears

Concerns are growing in Turkey of Islamic radicalization at some universities, after clashes between supporters of the jihadist group Islamic State (IS) or ISIS, and those opposed to the extremists. Pro-jihadist literature is on sale openly on the streets of Istanbul. Critics accuse the government of turning a blind eye to radicalism at home, while Kurds accuse the president of supporting IS - a charge strongly denied. Henry Ridgwell reports from London.
Video

Video Syrian Defector Leaks Shocking Photos of Torture Victims

Shocking photographs purporting to show Syrian torture victims are on display at the U.S. Holocaust Memorial Museum in Washington. The museum says the graphic images are among thousands of photographs recently smuggled out of Syria by a military policeman-turned-defector. As VOA reporter Julie Taboh reports, the museum says the photos provide further evidence of atrocities committed by the government of Syrian President Bashar al-Assad against its own people.
Video

Video Drought-Stricken California Considers Upgrading Water System

A three-year drought in California is causing a water shortage that is being felt on farms and cities throughout the state. As VOA's Mike O’Sullivan reports, water experts, consumers and farmers say California needs to make changes to cope with an uncertain future.
Video

Video TechShop Puts High-tech Dreams Within Reach

Square, a business app and card reader, makes it possible to do credit card transactions through cell phones. But what made Square possible? VOA’s Adrianna Zhang and Enming Liu have the answer.
Video

Video Church for Atheists Goes Global

Atheists, by definition, do not believe in God. So they should have no need of a church. But two years ago, a pair of British stand-up comedians decided to create one. Sanderson Jones and Pippa Evans told the BBC they envisioned “something like church but without God". Their “Sunday Assembly” movement has grown from a single congregation in London to dozens of churches around the world. Reporter Mike Osborne visited with the members of a Sunday Assembly that now meets regularly in Nashville.
Video

Video Robot Locates Unexploded Underwater Mines

Many educators believe that hands-on experience is the best way to learn. Proving that the method works is a project developed by a group of students at the Stevens Institute of Technology, in Hoboken, New Jersey. They rose up to a challenge posted by the U.S. Department of Defense and successfully designed and built an underwater robot for locating submerged unexploded ordnance. VOA’s George Putic reports.
Video

Video Liberia's JFK Hospital Reopens After Temporary Ebola Exposure

JFK Hospital is Liberia’s largest and one of its oldest medical facilities. The hospital had to close temporarily following the deaths of two leading doctors from Ebola. It is now getting back on its feet, with the maternity ward being the first section to reopen. Benno Muchler has more for VOA News from Monrovia.
Video

Video Hong Kong Protests Expose Generation Gap

Most of the tens of thousands of protesters in Hong Kong are students seeking democracy. Idealistic youths say while the older generation worries about the present, they are fighting for the territory's future. VOA's Daniel Schearf reports from Hong Kong.
Video

Video Liberians Living in US Struggle From Afar as Ebola Ravages Homeland

More than 8,000 Liberians live in New York City, more than in any other city outside of Liberia itself. As VOA’s Bernard Shusman reports, with the Ebola virus ravaging their homeland, there is no peace of mind for these New Yorkers.
Video

Video Kurds See War-Ravaged Kobani As Political, Emotional Heartland

Intense fighting is continuing between Islamic State militants -- also known as ISIS or ISIL -- and Kurdish forces around the Syrian town of Kobani, on the Turkish border. The U.S. said it carried out at least nine airstrikes against Islamic State positions Friday. Meanwhile the U.N. has warned that hundreds of civilians would be massacred if the town falls to the militants. Henry Ridgwell looks at the strategic significance of the city.

All About America

AppleAndroid

World Currencies

EUR
USD
0.7798
JPY
USD
106.41
GBP
USD
0.6203
CAD
USD
1.1242
INR
USD
61.430

Rates may not be current.