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Luxury Shoppers – The Far Side of Chinese Society?

Not only has China become the world’s second-largest economy in terms of GDP, this country of famously high household savings rates has also become the world’s second-largest market for luxury goods.

Hot on the heels of the Japanese, who were avid buyers of luxury brand goods during the heyday of their economy, and continued to be so even during the “lost decade,” Chinese have taken over the position of the extremely brand-conscious for whom happiness seems to be the pursuit of handbags.

Even leaving aside the oddity of Chinese men carrying their girlfriend’s/wife’s purse (which is not all that odd) or having their own handbag (which looks worse to the foreigner, but also has its logic), one continues to wonder how luxury consumption in China fits in.

The first point it raises, a point that is almost always necessary when talking about China, is the need to understand that “China” barely exists. There is great diversity between different regions, different strata of society – and thus also in wealth and consumer behavior.

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Social Strata

Even looking at the case of extreme luxury consumption, things can be less clear-cut than they may appear. Of course, you have to be truly rich to buy your own private jet, yacht, what-not… When there are reports of 89 billionaires in mainland China and Hong Kong (2010), and recently, there are said to be 115, it already makes a difference if they are in mainland China or in Hong Kong, though. Add the 213 billionaires of Chinese origin – and try not to get confused about who’s of Chinese origin, who’s in China, and who’s Chinese..

Most of the time, however, the luxury consumption that gets the widest attention is simply that of the emerging Chinese middle class, anyways.

Said middle class is notoriously difficult to define, though, both in terms of simple (income) measures and, even more so, in terms of cultural ideas (cf. Helen Wang talking about the issue here, re. her book, “The Chinese Dream” [Amazon affiliate link]). The middle class are quite clearly, however, those who have some money to spend, and who seem to spend an inordinate amount on luxury brand goods. Some 20-25% of the Chinese population, some 300 million people, are considered as falling into this group.

Yet again, it’s quite wrong to talk of such groups as if they were uniform, though.

Internal Differences

As mentioned by Wang, there is a large difference in purchasing power – as in, money available for purchases – between urban, coastal residents and inland, lower-tier city residents. Beijing and Shanghai, to name the always-prominent examples, may (seem to) offer more chances at gaining a higher income, but life is also more expensive there.

In lower-tier places, chances look worse, but a teacher’s or professor’s salary – speaking from my own experience here – is quite enough to live well and have money to spend. Not on luxury good bought in-country, though, given that China’s import and luxury taxes make such items more expensive here than they are in Europe, let alone the USA.

Generational differences also play a major role. In my experience, elder people who come to wealth may consider getting a (nice) car and a better cellphone, and especially an(other) apartment, but are not all that interested in most, and particularly luxury, purchases. Having a nest egg counts a lot more to them than flashing wealth (and note that the Chinese Academy of Social Sciences uses a family’s assets rather than income as sign of middle class-status).

Younger people, however, having grown up not only with some members of the earlier generation who made it rich and showed it, but (more importantly) having been raised on a fare of Chinese and foreign TV series showing rather upper-class lifestyles and their symbols, are very brand-conscious. It is mainly they who compete through brand goods.

Even here, things are more complicated than they may appear, as brands are experienced in a rather different way from how you may think, and also shown in various ways… but that will be the issue of a following post.

Clearly, in spite of all the talk about *the* Chinese market, it is a diverse beast with many different faces – even when talking about members of the “global consumer class.”