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 Snowstorm Sweeps Northeastern US

'This is nothing like we feared it would be,' New York City Mayor Bill de Blasio says; he had earlier warned storm could be one of worst the city has ever faced More

Millions of Displaced Nigerians Struggle With Daily Existence

Government acknowledges over a million people displaced in 2014 due to fight against Boko Haram insurgency More

Facebook: Internal Error to Blame for Outages

Temporary outage appeared to spill over and temporarily slow or block traffic to other major Internet sites 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.
Obama Urges Closer Economic Ties During Historic India Visiti
X
Aru Pande
January 26, 2015 9:33 PM
U.S. President Barack Obama says the United States and India must do better to capitalize on untapped potential in their economic relationship - by removing some of the roadblocks to greater trade and investment. As VOA correspondent Aru Pande reports from New Delhi, Obama spoke after participating in India’s Republic Day celebration.
Video

Video Obama Urges Closer Economic Ties During Historic India Visit

U.S. President Barack Obama says the United States and India must do better to capitalize on untapped potential in their economic relationship - by removing some of the roadblocks to greater trade and investment. As VOA correspondent Aru Pande reports from New Delhi, Obama spoke after participating in India’s Republic Day celebration.
Video

Video US, EU Threaten New Russia Sanctions Over Ukraine

U.S. President Barack Obama has blamed Russia for an attack by Ukrainian separatists that left dozens dead in the port of Mariupol and cast further doubt on the viability of last year’s cease-fire with the Kyiv government. VOA’s Michael Bowman reports from Washington.
Video

Video White House Grapples With Yemen Counterterrorism Strategy

Reports say the U.S. has carried out a drone strike on suspected militants in Yemen, the first after President Barack Obama offered reassurances the U.S. is continuing its counterterrorism operations in the country. The future of those operations has been in question following the collapse last week of Yemen’s government. VOA White House correspondent Luis Ramirez reports.
Video

Video Kerry Warns Against Violence in Nigeria Election

US Secretary of State John Kerry visited Nigeria Sunday in a show of the level of concern within the U.S. and the international community over next month’s presidential election. Chris Stein reports.
Video

Video Zoo Animals Show Their Artistic Sides

The pursuit of happiness is so important, America's founding fathers put it in the Declaration of Independence. Any zookeeper will tell you animals need enrichment, just like humans do. So painting, and even music, are part of the Smithsonian National Zoo's program to keep the animals happy. VOA’s June Soh met some animal artists at the zoo in Washington. Faith Lapidus narrates.
Video

Video Worldwide Photo Workshops Empower Youth

Last September, 20 young adults from South Sudan took part in a National Geographic Photo Camp. They are among hundreds of students from around the world who have learned how to use a camera to tell the stories of the people in their communities through the powerful medium of photography. Three camp participants talked about their experiences recently on a visit to Washington. VOA’s Julie Taboh reports.
Video

Video Saudi, Yemen Developments Are Sudden Complications for Obama

The death of Saudi Arabia's King Abdullah and the collapse of Yemen’s government have cast further uncertainty on U.S. efforts to fight militants in the Middle East and also contain Iran’s influence in the region. VOA White House correspondent Luis Ramirez reports on the new complications facing the Obama administration and its Middle East policy.
Video

Video Progress, Some Areas of Disagreement in Cuba Talks

U.S. and Cuban officials are reporting progress from initial talks in Havana on re-establishing diplomatic ties. U.S. Assistant Secretary of State (for Western Hemisphere Affairs) Roberta Jacobson said while there was agreement on a broad range of issues, there also are some “profound disagreements” between Washington and Havana. VOA State Department correspondent Pam Dockins has the story.
Video

Video US, Japan Offer Lessons as Eurozone Launches Huge Stimulus

The Euro currency has fallen sharply after the European Central Bank announced a bigger-than-expected $67 billion-a-month quantitative easing program Thursday - commonly seen as a form of printing new money. Henry Ridgwell reports for VOA from London on whether the move might rescue the eurozone economy -- and what lessons have been learned from similar programs around the world.
Video

Video Nigerian Elections Pose Concern of Potential Conflict in 'Middle Belt'

Nigeria’s north-central state of Kaduna has long been the site of fighting between Muslims and Christians as well as between people of different ethnic groups. As the February elections approach, community and religious leaders are making plans they hope will keep the streets calm after results are announced. Chris Stein reports from the state capital, Kaduna.
Video

Video As Viewership Drops, Obama Puts His Message on YouTube

Ratings reports show President Obama’s State of the Union address this week drew the lowest number of viewers for this annual speech in 15 years. White House officials anticipated this, and the president has decided to take a non-traditional approach to getting his message out. VOA White House correspondent Luis Ramirez reports.
Video

Video S. Korean Businesses Want to End Trade Restrictions With North

Business leaders in South Korea are calling for President Park Geun-hye to ease trade restrictions with North Korea that were put in place in 2010 after the sinking of a South Korean warship.Pro-business groups argue that expanding trade and investment is not only good for business, it is also good for long-term regional peace and security. VOA’s Brian Padden reports.

Circumventing Censorship

An Internet Primer for Healthy Web Habits

As surveillance and censoring technologies advance, so, too, do new tools for your computer or mobile device that help protect your privacy and break through Internet censorship.
More

All About America

AppleAndroid

World Currencies

EUR
USD
0.8893
JPY
USD
118.31
GBP
USD
0.6660
CAD
USD
1.2459
INR
USD
61.427

Rates may not be current.