China Economy Soaring – Not Participating In World Economic Crisis
China Gobbles up Luxuries Like They’re Going out of Style
About: World Luxury Association, China’s Global Times, Louis Vuitton brand LVMH (LVMHF.PK), Richemont (CFR.VX), Rupert Hoogewerf, China Daily, Hurun Rich List, China’s economy, China investing, China economy, China Stock Digest, Chinese economy, China stock market
The shopping habits of Rodeo Drive and Fifth Avenue are moving east – Far East. From high-priced handbags to private jets, China is the new luxury frontier, as wealthy westerners continue to struggle to recover from the financial crisis.
The World Luxury Association reports that the total consumption of the luxury goods in the China market has reached $9.4 billion annually. As China’s Global Times put it, “The Chinese rich are crazy to get their hands on whatever luxuries they can.”
China now makes up an eye-popping 27.5 percent of the world’s total luxury goods market. It has become the second largest market for luxury groups in the world, after Japan.
And, it’s only a matter of time until China becomes the largest consumer of luxury goods in the world, so it makes sense to follow this trend closely. Stocks affected will include the Louis Vuitton brand LVMH (LVMHF.PK), and Richemont (CFR.VX).
Currently China has 825,000 individuals worth more than 10 million yuan, almost $1.5 million in U.S. dollars. China Daily reports that there are 51,000 people with more than 100 million yuan or almost $15 million.
But there are levels even higher than these “yuan millionaires.” Rupert Hoogewerf, the founder of the famous Hurun Rich List, likes to call China’s billionaires the “new nobility”. He estimates that a billionaire in Beijing would usually own three houses, a villa in suburb, a condominium in the city and a courtyard house, as well as an art collection of some kind.
The Hurun report estimates that a yuan billionaire in Beijing consumes $1 million worth of goods a year. One billion yuan equals $146 million
Above that level are the “super-rich”, American style dollar-billionaires, who indulge in a taste for private jets. China Daily reports that private jet sales on the Chinese mainland may double this year. A private jet costs about $20 million in China, not including the nearly $2 million a year needed to maintain and operate it.
Returning to the realm of wealth that most westerners still understand, sales of luxury items are booming with the rise of the middle and upper classes in first tier cities like Beijing and Shanghai. Even in lesser known cities like Hangzhou, sales of luxury goods have seen consecutive double-digit growth in recent years. An estimated 80 percent of the global top brands have storefronts in Hangzhou.
China’s luxury consumers are estimated to be younger than their counterparts in America and Europe. Surprisingly, despite an abundance of counterfeit goods throughout China, the nation’s affluent buyers still prefer the real thing.
Luxury buying in China is all about displaying wealth, status and power. To be spotted with a fake watch or handbag for example, would result in a considerable loss of face for a wealthy Chinese person.
For those who can afford luxuries in China, the real thing is the only thing.
According to the statistics from the World Luxury Association (WLA)
Last year, affluent Chinese lavished $9.4 billion on luxury goods, making China the world’s second largest consumer of luxury goods behind Japan, a report by said.
China’s super-rich bought 27.5 percent of the world’s luxury goods last year, it said.
“China will become the largest consumer of luxury goods in the world sooner or later. It’s just a matter of time,” Meng said.