Chinas cut down on ostentatiousness

1 May

Since the election of Xi Jingping, there has been a huge crack down on the displays of wealth in China, especially among public officials. Earlier this year there was a ban placed on the advertising of luxury goods “which encourage extravagant gift-giving”. Mr Xi wants to make more linkages with the Communist Party by decreasing the inequality gap that has become so prevalent in recent decades and reduce the perceived corruption of officials, thus putting the trust back into the government.

Some have claimed that these austerity measures have contributed to the lower levels of economic growth, at 7.7%, experienced in the last quarter. The Financial Times interviewed the owner of a flower stall who has claimed that the new law has had a seriously detrimental effect on his business. He explained that 60% of his business used to come from State Owned Enterprises (SOEs) who used to have lavish monthly banquets, however with the enforcement of the new laws he has lost his biggest customers.  

There was fear at the end of 2012 that the crackdown on luxury goods would not only hit local stores but it would also have a detrimental effect on the retail sector as a whole including high-end luxury brands, as well known labels such as Burberry and tiffany reported a sharp fall in profit in China.

This has led to an increase in sales of luxury goods overseas by Chinese nationals. A recent report has found that Chinese tourists spent a huge $8.5 billion overseas on luxury goods in January, accounting for half of all luxury goods spending in the world! This high splurge overseas can be attributed to high government taxes, which range between 20% and 70% on some luxury goods domestically.

Despite the economic slowdown in the first quarter of 2013, high-end luxury brands are reporting an increase in sales once again, with Burberry and Rolls Royce among them. Furthermore the retail sector in general appears to be going strong at all levels once again! 

In reality, officials go to great lengths to conceal their private wealth and thus no officials would dare to criticize a campaign against luxury spending due to the negative criticism they would receive. Therefore this has not led to a decrease in corruption but rather a bid to further conceal the corruption of local governments, who are already overspending and mounting up debt domestically.

 

 

http://www.ft.com/cms/s/0/825cba22-a5ba-11e2-9b77-00144feabdc0.html#axzz2QkVaMf7D  – China retailers shift from ostentatious

http://www.ft.com/cms/s/2/2766c9b2-fc25-11e1-ac0f-00144feabdc0.html#axzz2QkVaMf7D – Luxury sector fears Burberry has set trend

http://www.ft.com/cms/s/0/e6cd1a16-a749-11e2-9fbe-00144feabdc0.html#axzz2QkVaMf7D  – Burberry taps China to beat luxury fears

http://www.cnbc.com/id/100491304 – Wealthy Chinese Shift Their Luxury Buying Overseas

http://www.bbc.co.uk/news/world-asia-china-21349722 China bans luxury gift adverts in austerity push

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