Luxury goods market feels pinch amid crisis
Bill Savadove in Shanghai
Designer brands pinning hopes on China may be undone by 'girlfriend economics'
China's economy is scurrying towards trouble, if the 'hairy crab' index is any measure. Prices for the food delicacy have dropped between 30 and 50 per cent, in part due to the global economic crisis.
Crab industry official Yang Weilong said he believed a market still existed for the very finest crabs taken from Yangcheng Lake, not far from the commercial capital of Shanghai.
'We had predicted the price would increase by 10 per cent. But now we perceive the price isn't going up, due to the financial crisis and the depressed stock market,' said Mr Yang, chairman of the Yangcheng Lake Crab Industry Association.
Sellers of luxury goods and services are looking to China's domestic demand to save them from the crisis ravaging the rest of the world. But increased economic integration means China is also feeling the pain.
Nowhere is the marketing of luxury more evident than in Shanghai, even as the world economy collapses.
Men's luxury goods retailer Alfred Dunhill and Swiss watch maker Vacheron Constantin recently opened stores in restored twin villas. French jeweller Cartier just hosted a polo match in Zhejiang province near Shanghai, flying in two teams and entertaining guests with a champagne lunch.
Two private members' clubs, M1NT and Hong Kong's KEE, are courting the wealthy for new branches in Shanghai. Dubai-based Jumeirah Group is scheduled to open Shanghai's most expensive hotel late this year.
Shanghai even hosted 'The Millionaire Fair' in October, although it was renamed 'The Fair' out of consideration for the new austerity.
Independent economist Andy Xie jokingly calls China's market for luxury goods 'girlfriend economics'. His theory is that men buy luxury items for their girlfriends or mistresses, and stop buying when times are tight.
Luxury goods makers who pin their hopes on China might be disappointed. 'It's a special part of the Chinese economy. It's very cyclical. When the stock market goes up, the sales of luxury products go through the roof,' he said.
Shanghai stocks have fallen about 70 per cent this year.
Shanghai's economy is still growing by double digits - 10.1 per cent for the first nine months of this year, higher than the national level of 9.9 per cent. The city's retail sales surged more than 17 per cent during the period to 335 billion yuan (HK$380.2 billion). But China's wealthy are getting poorer, according to the latest list of China's richest people compiled by Forbes magazine.
The combined wealth of China's 40 richest has fallen 57 per cent to US$52 billion from US$120 billion last year, due to falls in the mainland and Hong Kong stock markets. The minimum net worth required to make the list this year was US$790 million, down 42 per cent from US$1.36 billion last year.
'The market is still going to be there for luxury goods companies. It's just not going to be growing as quickly as perhaps a lot of people were hoping,' list compiler Russell Flannery said. 'Even though the wealth numbers are strikingly down from a year ago, it's foolish to lose sight of the fact that China is still richer today than it's ever been.'
Shanghai is especially vulnerable to the crisis with its dependence on financial services and exports.
White-collar workers, who might splurge on luxury items, are already starting to limit spending as the financial turmoil continues.
Rich get poorer
The combined wealth, in US dollars, of China's 40 richest last year was: $120b
This year, the total has dropped to: $52b