Is Luxury Ready for Double the Amount of Millionaires in China?

    Contrary to the West, China’s upper and middle classes are expanding and getting richer. What does this mean for luxury retail in the country?
    Contrary to the West, China’s upper and middle classes are expanding and getting richer. What does this mean for luxury retail in the country? Photo: Shutterstock
    Adina-Laura AchimAuthor
      Published   in Fashion

    What happened

    HSBC estimates that Chinese consumers are getting richer. The country will more than double its number of millionaires over the next five years. The middle class will also expand from about 340 million to over 500 million during that same period.

    “An expanding middle class will underpin medium to long-term economic growth, and stronger consumer spending boosts domestic demand, business confidence, and capital expenditure,” HSBC economists led by Qu Hongbin wrote. “A rising middle class will also increase imports of goods and services, and attract foreign companies to invest in China.”

    The Jing Take

    This positive trend in China stands in contrast to downward trends in most Western nations.

    In the past decades, wealth inequality has worsened in the US, despite federal and state government policies aimed at rebuilding the middle class and boosting the economy. There, consumer spending has been inhibited, bringing a significant drop in real household disposable income. That has affected retail sales and exacerbated the fall of vulnerable brick-and-mortar retailers.

    But in China, retail sales are growing, and this sharp increase in sales and profitability has transformed the country into a "laboratory for retail innovation."

    China's boost in household wealth has been equally important, justifying the adoption of capitalist values. Kearney defines this mentality as “keeping up with the Wangs.”

    Signaling personal status and success with luxury goods has become the norm in China, which benefits Western brands. More than 70 percent of middle-income consumers are buying established Western brands, according to Daxue Consulting.

    As Chinese consumers evolve, becoming wealthier and more sophisticated, they are reshaping the retail environment. The most direct consequence is the democratization of luxury and the flooding of the market with branded products. But, unfortunately, this leads to brand disillusion. For instance, Louis Vuitton is no longer a symbol of prestige and exclusivity in China and is now associated with "secretaries."

    On the whole, there is a positive outcome that has come with the maturing of the market. High-net-worth individuals are slowly driving the rise of the conscious consumer movement.

    The Jing Take reports on a piece of the leading news and presents our editorial team’s analysis of the key implications for the luxury industry. In the recurring column, we analyze everything from product drops and mergers to heated debate sprouting on Chinese social media.

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