“China Bull” Deutsche Bank Predicts Luxury Growth To Almost Triple

Double Digits Projected For 2013 Despite Slowdown

A woman looks at Hermes bags in Shanghai. (Global Post)

A woman looks at Hermes bags in Shanghai. (Global Post)

According to a China Daily report, Deutsche Bank AG has released a projection that China’s luxury growth rate will pick up by the end of this year to reach a rate of 20 percent, an amount slower than last year but nearly triple its current single-digit rate of 7 percent.

This estimate is much higher than the numbers being cited for China’s overall year-end GDP growth rate. CNBC calls Deutsche Bank a “China bull” for predicting 8.6 percent GDP growth in 2013, an increase far less dramatic than the double-digit luxury projection. The country’s first-quarter GDP growth of 7.7 percent came in at a slower rate than analysts had expected, and the bank’s forecast is far higher than the official target of 7.5 percent for 2013. It is also far more generous than those of other analysts such as JP Morgan, which, after downgrading its earlier prediction, believes we will see 7.8 percent growth.

This prediction takes the luxury slowdown into account, since the move back into the double digits will still mark a decrease from last year’s rate of 30 percent. This projection is in line with many companies’ statements that more dramatic first-quarter growth rate decreases are only a temporary slump, and that the slowdown will not be as prominent by the end of the year.

The bank’s reasoning relates to optimism that China’s sluggish economy will bounce back in the second half of the year and an assumption that the government will encourage consumer spending by keeping interest rates low.

The bank also predicted a continued rise in the number of overseas Chinese luxury purchases, which, along with purchases made in Hong Kong, are much more frequent than those on the mainland thanks to the mainland’s high prices.

The state-run news outlet’s choice to pick up on a particularly optimistic outlook for luxury may be related to recent government discussion of a possible new luxury tax, which, if eventually implemented, could affect these numbers.

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