China’s “Odd” Markets–The Cultural Economy of Luxury

Housing prices in China can make Manhattan seem attractive; prices for antiques and artworks (let alone antique works of art) have gone through the roof; the country is quickly becoming one of the largest markets for luxury goods.

In all of those notable cases, China simply seems odd.

Housing that costs several times the average monthly salary; antiques that may be relatively recent works but aren’t thought to be by the buyers, and even contemporary works of as-yet-undetermined long-term value; a country that is still developing, yet single-handedly rescues luxury brands – not to mention a nominally Communist country that often looks rather like Manchester at the time it invented early industrialization’s capitalism.

Looking at economic aspects can clarify things somewhat, but it is in cultural logic – which economic life is really a part of – that things make perfect sense. Or at least, as much sense as human behavior ever makes.

Huang Zheng’s “Sell”–the flyer shows the price per sq.m., the people realize how long it would take them to earn enough so they could afford such a place

Why would anybody ever want to buy property when it will make them a “house slave,” bound to that place (and debt for it) forever and longer – and you don’t even have much in the way of security over it?! If the government decides that the land is needed for another development (which often turns from “if” into “when”), there should be reimbursement, but there’s often just the loss. You don’t own the land, anyways, it’s the state’s, only leased to the first developer it was “sold” to for 70 years.

Yet, a place to live is a very sought-after commodity. Not so much to pass on to your children, but simply now and in the near future – and a few decades of ownership is probably enough for your own life, after all. Since everybody wants it – people even say that it’s a tradition that turning into an adult includes getting your own place – well, everybody wants it.
A potential wife will worry that she’d otherwise have to live with her parents-in-law (at least as much of a tradition as a place of the new couple’s own), every wannabe-husband just knows that he’s got no chances on the marriage market if he does not have a house/apartment of his own; his parents have probably been saving all their lives because they know that fact even more strongly; her parents are likely telling her that she has no better chance for a good life than finding a husband who has enough money to care for her.

The focus on marriage and the link between marriage and property may seem strange, but they are just facts of life within most of contemporary Chinese culture. At least for the case of marriage, there is a truly strong foundation in traditional culture. Becoming an adult is almost synonymous with getting married, and marriage has typically been something that includes new social links and an economic exchange between the two families…

Furthermore, since everybody just knows how important it is to own property, many think that the prices can only rise further. All the more reason not to wait, for fear of being priced out of the market even more completely than most already are.

Add to these social factors how few investment opportunities and safe havens for their money Chinese who have become affluent find: you can put your money into luxury consumption, you can invest in stock, or you can buy real estate (aside from getting the money out of the country, which isn’t all that easy). The latter does seem the most secure, and even the most likely to appreciate further in value.

Luxury is – obviously enough – not out of the picture, and similar forces play out.

A place of your own – i.e., for your future family and/or to have money well-invested – may be something you feel good about having, but you advertise having made it, having joined the ranks of those who aren’t left behind, through things you can show publicly.

“Clothes make people,” even in the West, but in a place that is as concerned with image – “face” – as China, the visible things (starting from the body itself) are particularly important. Having grown up to take your self-worth from what others say and should think about – and maybe even how they look at – you, it seems only natural.
Handbags, even for men, smartphones, and luxury watches earn their lofty positions right there, and have particular cachet when they are recognizably of a brand that is well-known. Cars add comfort and distance from the masses (even if you end up ensconced in your nice car in the middle of the congested traffic that is getting ever worse).

Add how much you hear about all the nice things people should have, and the pressure from social comparison mounts even more. Add that China has only quite recently embarked on its development – and maybe that there is insecurity about how long it will last – and an appreciation for luxury becomes even more understandable again.

More direct value propositions still sway attitudes:
For many, originals are out of the question because their incomes are still too low. When fakes are affordable and look fitting enough (and your surroundings aren’t likely to be discerning enough to call you out on it), they may easily be the product of choice.
When the quality of originals is much better and you can get them for a good price within range, there you go. And as China’s import and luxury taxes make foreign brand-name products more expensive here than in Europe, shopping abroad is a good deal (not to forget the certainty it gives about authenticity).

Another social context that needs to be mentioned, at least in passing: Giving an official some money is obviously corruption, but a little present is just a gesture of goodwill. Giving the woman you love something nice, if you can afford it, is seen in a positive light – and if you don’t love her, but keep her to make you look good and powerful, she has to look good (and have some security other than that she’d have from being the wife) all the more.
The two are regularly described as related, i.e. rich and/or powerful people as feeling a need to show their wealth/status through a lover, and lovers pressuring them to give them expensive gifts, pushing the (“poor, hapless”?) men into corruption.

Similar linkages also may be at work in the arts market: Everybody knows that there is money to be made in it, and since China is on the rise, its art (supposedly) cannot but rise in value. Additionally, investing in art shows – at the very least, to yourself – that you are not just a person with money, but also with panache and erudition… or something. If it’s modern, you are avant-garde; if old, you are cultured and patriotic. And the higher the prices at auctions go, the clearer it becomes just how strongly China is on the rise… (For all the hoopla on that, check out this post.)

Welcome to the world of sociocultural influences, where things tend to make sense when they are seen from within any one culture’s own logic. Until they don’t.

And what's your take?