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

Video One Year After Thai Coup, No End in Sight for Military Rule

Since carrying out the May 22, 2014 coup, the general has retired from the military but is still firmly in charge More

Goodbye, New York

This is what the fastest-growing big cities in America have in common More

Job-Seeking Bangladeshis Risk Lives to Find Work

The number of Bangladeshi migrants on smugglers’ boats bound for Southeast Asian countries has soared in the past two years 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.
Turkey's Main Opposition Party Hopes for Election Breakthroughi
X
May 22, 2015 10:23 AM
Turkey’s main opposition Republican People’s Party has sought an image change ahead of the June 7 general election. The move comes after suffering successive defeats at the hands of the Islamist-rooted AK Party, which has portrayed it as hostile to religion. Dorian Jones reports from the western city of Izmir.
Video

Video Turkey's Main Opposition Party Hopes for Election Breakthrough

Turkey’s main opposition Republican People’s Party has sought an image change ahead of the June 7 general election. The move comes after suffering successive defeats at the hands of the Islamist-rooted AK Party, which has portrayed it as hostile to religion. Dorian Jones reports from the western city of Izmir.
Video

Video Europe Follows US Lead in Tackling ‘Conflict Minerals’

Metals mined from conflict zones in places like the Democratic Republic of Congo are often sold by warlords to buy weapons. This week European lawmakers voted to force manufacturers to prove that their supply chains are not inadvertently fueling conflicts and human rights abuses. Henry Ridgwell reports from London.
Video

Video Class Tackles Questions of Race, Discrimination

Unrest in some U.S. cities is more than just a trending news item at Ladue Middle School in St. Louis, Missouri. As VOA’s Kane Farabaugh reports, it’s a focus of a multicultural studies class engaging students in wide-ranging discussions about racial tensions and police aggression.
Video

Video Mind-Controlled Prosthetics Are Getting Closer

Scientists and engineers are making substantial advances towards the ultimate goal in prosthetics – creation of limbs that can be controlled by the wearer’s mind. Thanks to sophisticated sensors capable of picking up the brain’s signals, an amputee in Iceland is literally bringing us one step closer to that goal. VOA’s George Putic reports.
Video

Video Afghan Economy Sinks As Foreign Troops Depart

As international troops prepare to leave Afghanistan, and many foreign aid groups follow, Afghans are grappling with how the exodus will affect the country's fragile economy. Ayesha Tanzeem reports from the Afghan capital, Kabul.
Video

Video Poverty, Ignorance Force Underage Girls Into Marriage

The recent marriage of a 17-year old Chechen girl to a local police chief who was 30 years older and already had a wife caused an outcry in Russia and beyond. The bride was reportedly forced to marry and her parents were intimidated into giving their consent. The union spotlighted yet again the plight of many underage girls in developing countries. Zlatica Hoke reports poverty, ignorance and fear are behind the practice, especially in Asia and Africa.
Video

Video South Korea Marks Gwangju Uprising Anniversary

South Korea this week marked the 35th anniversary of a protest that turned deadly. The Gwangju Uprising is credited with starting the country’s democratic revolution after it was violently quelled by South Korea’s former military rulers. But as Jason Strother reports, some observers worry that democracy has recently been eroded.
Video

Video California’s Water System Not Created To Handle Current Drought

The drought in California is moving into its fourth year. While the state's governor is mandating a reduction in urban water use, most of the water used in California is for agriculture. But both city dwellers and farmers are feeling the impact of the drought. Some experts say the state’s water system was not created to handle long periods of drought. Elizabeth Lee reports from Ventura County, an agricultural region just northwest of Los Angeles.
Video

Video How to Clone a Mammoth: The Science of De-Extinction

An international team of scientists has sequenced the complete genome of the woolly mammoth. Led by the Swedish Museum of Natural History in Stockholm, the work opens the door to recreate the huge herbivore, which last roamed the Earth 4,000 years ago. VOA’s Rosanne Skirble considers the science of de-extinction and its place on the planet
Video

Video Blind Boy Defines His Life with Music

Cole Moran was born blind. He also has cognitive delays and other birth defects. He has to learn everything by ear. Nevertheless, the 12-year-old has had an insatiable love for music since he was born. VOA’s June Soh introduces us to the young phenomenal harmonica player.

VOA Blogs

World Currencies

EUR
USD
0.8957
JPY
USD
120.93
GBP
USD
0.6393
CAD
USD
1.2199
INR
USD
63.470

Rates may not be current.