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For the last 30-odd years China’s economic growth has been astounding. It’s gone from a country torn apart by internal struggle to one that threatens to topple the more robust economies of North America and Europe. But the growth has been uneven and the country is plagued by the one problem that faces almost all developing countries: an increasing gap between the rich and poor. It’s a problem that the Chinese government recognises but there are no quick fixes.
Lu Kang, deputy director general at the Ministry of Foreign Affairs’ Department of North American and Oceanic Affairs has been quoted as saying, “In 10 years, China will still be a developing country.” He adds that while the standard of living is expected to improve generally, the rural areas will probably not see any significant changes.
China and Japan have worked hard to grow their economies to the point where they have among the most self-indulgent consumers in the world. Brand names are flashed ostentatiously by all social classes and the illusion of wealth is almost as important as wealth itself. It’s a cultural phenomenon that has been immortalised (and perhaps encouraged) by the likes of authors Natsuo Kirino and Haruki Murakami, as well as singing sensation Gwen Stefani – who took a shine to Japan’s Harajuku girls.
But now it seems as though China is backtracking on its blatant consumer-centric policies, at least on a superficial level. After 15 April it will be illegal for businesses in Beijing to use advertising with the words luxury or luxurious or any similarly evocative words, as the municipality says that to do so promotes hedonism and spiritual emptiness.
Why is this only superficial? Well, an article on CNN.Money cites Aaron Fischer of CLSA (Credit Lyonnais Securities Asia), who says that if China really wanted to send a message it would change the duties on luxury goods. In fact, it’s believed that the law isn’t aimed at stamping out hedonism at all, but is rather intended to do away with false advertising.
Aside from saving consumers from dodgy advertisers, China is also concerned with keeping consumers on the mainland. Currently, nearly one in two Chinese consumers head off the mainland to do their luxury shopping. Their primary destination is Hong Kong, but they also go as far as Milan, Paris and New York. The reason: tax.
Katherine Ryder reports that there is a 30% tax on luxury goods on the mainland. There are, however, rumours that the tax is on its way out, which coincides with an increased interest in investment from major brands. As China’s luxury market continues to grow, it seems that high-end fashion and accessory brands are eager not to miss out.
Considering that consumers have been known to spend upwards of $9000 per shopping trip, it’s never been a better time to open shop in China.
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Source by Sandra Cosser
