As the global economy deteriorates, and China tries to accelerate its shift to a more consumer-led growth model, Beijing’s leaders see luxury items as a lucrative revenue source. Many Chinese buy luxury products in Hong Kong or abroad to avoid China’s high taxes, so officials are debating a move to slash tariffs to encourage consumers to shop at home.
But the government is loath to be seen as taking any new measures to support the sliver of the population that can afford that pricey new Hermes bag or latest Ferrari, and has delayed any decision on cutting tariffs, according to Chinese media reports and industry analysts.
“The government is facing a conflict,” said Michael Ouyang, representative of the World Luxury Association in China. “They don’t want to promote luxury because they are worried people who cannot afford it will see the advertisements. But they don’t want to limit luxury products because it’s good for the economy. So they’re facing a dilemma.”
It doesn’t help the government’s case when the rich keep showing off their bling.
Exhibit A might be a 20-year-old woman calling herself “Guo Meimei Baby.”
Guo — whose name “Meimei” means “Pretty, pretty” — became a recent Internet sensation in China, and prompted a national scandal, when she posted photos of herself on her microblog posing with her collection of imported Hermes handbags and showing off her white Maserati sports car, called “little horse,” and her (married) boyfriend’s orange Lamborghini, called “little bull.”
The initial outrage was over suspicion that she was linked to China’s largest, government-run charity. But many here said the “Guo Meimei scandal,” as the story became known, exposed a common, and unflattering, aspect of China’s headlong rush to get rich: a tendency among China’s new super-rich to show off how much money they have.
“People like showing off their wealth,” said Yang Xu, who runs a shop called Vogue 2 that specializes in secondhand designer handbags. “The consumption of luxury products has grown too fast. It’s beyond anybody’s imagination.”
In his shop, for example, Hermes bags have become more popular than the Louis Vuitton brands for a simple reason: They are more expensive.
China’s rise in the world market
At a time when Europe and the United States are still struggling with stagnant economies, China has emerged as the premier long-term market for luxury products. Chinese bought $12 billion in luxury goods last year, according to Ministry of Commerce statistics. China will account for 20 percent of all worldwide luxury sales by 2015, according to the McKinsey and Co. management consulting firm.