Who's Buying Luxury Goods As Gifts In China?

Another Point Of View From The Chinese-Language Media Earlier this week, McKinsey & Company released the results of their latest survey on luxury consumption in China, which showed that a full 50% of luxury purchases in China last year were made with the intention of giving these items as gifts to others. While these findings in themselves are not terribly surprising -- as Jing Daily pointed out yesterday, Lu and Chevalier said the same in their recent book Luxury China -- the reaction to these numbers in Chinese-language op-eds and blog posts has ranged from mildly critical to scathing. While many Chinese journalists and bloggers are proud that their country is estimated to overtake Japan to become the world's largest luxury market by 2015, a large number are deeply skeptical about who is buying these luxury goods, how they got the money to do so, and who they've giving them to as gifts. Below are translations of a few Chinese-language articles today that provide interesting counter-points to yesterday's articles about McKinsey's new study. (Translation by Jing Daily team.) "Official Luxury Consumption Has No Justification" (China Youth Daily, April 21, 2010) "China Economic Weekly" reported on April 20 that, according to a recently released report on the Chinese luxury goods market by Bain & Co., the luxury market in China grew nearly 12% in 2009, reaching $9.6 billion and accounting for 27.5% of global market share. In the next five years, the Chinese luxury goods market will amount to $14.6 billion and top the list of global luxury spending. According to Tianjin Returned Overseas Chinese Vice-Chairman Pan Qinglin, levying a luxury tax can, to a certain degree, address the unfair distribution of social income. Luxury consumption always touches a public nerve, and the imposition of a high luxury tax is advocated to curb extravagance, and reflects one of the reactions of the public towards luxury consumption. Luxury goods are included in the consumer taxes currently put in place in China -- Included in these taxes are non-necessity goods like jewelry, cosmetics, etc. Any other luxury goods that enter the market are subject to the same luxury tax. The rich want to show off by buying luxury goods, but the poor just want public services, so the government imposes a luxury tax -- hence, the rich spend their money but it benefits society. As long as their money is legitimate, this kind of consumer behavior doesn't do any real harm. But what really deserves our attention is the public aspect of luxury consumption, which itself is a chronic disease [in China]. Official transportation is getting ever larger and more luxurious, and for some officials one car isn't enough; some are lavishly outfitting their office buildings; some officials throw extravagant receptions, entertaining with alcohol and tobacco, sometimes spending thousands of RMB on bottles [of wine]...This [public] money could be put to much better use where it's needed, rather than used by officials to show off or entertain others. This is the most serious [form of] waste. Considering we're in the era of luxury consumption in China, the public should be tolerant of private luxury consumption while staying vigilant about luxury consumption by public officials. There is absolutely no justification for using the [tax] money of the common people for luxury consumption. "Who Are Luxury Goods Actually Sold To?" (Beijing Evening News, April 21, 2010) ...As for luxury consumption, if it is done with public funds, it's a waste of taxpayer money -- it's criminal. If people use public money for luxury consumption or use it to "honor" their superiors through bribery, it's a question of law rather than a question of consumption. Secondly, if rich people with ulterior motives are [giving luxury goods as gifts] to curry the support of those in power...in this reporter's point of view, this type of luxury spending is not only a weapon against the poor, it's a weapon against all of society. We can't afford not to keep an eye on this. Finally, for the sake of the consumption of a few rich people, a great deal of resources are used to produce luxury goods, leading to a deterioration of the efficient allocation of socioeconomic resources. If people in power enter into these ranks [of consumers], they'll contribute to further social plundering. At this stage in our country's development, unproductive consumption, conspicuous consumption, luxury consumption and so forth is not a blessing. Facing [headlines like] "50% of luxury goods purchased as gifts," in my point of view, society should look to other netizens and ask the question: who's it being given to? "What Does It Mean To Be The #1 Luxury Consumer?" ( Dahe Online , April 21, 2010) Many times, gifts are given with an ulterior motive in mind. Do we really give most gifts to our mothers or fathers? No, the majority of gifts aren't given to family members or friends, they're mostly given to corrupt officials or "higher-ups." So, currently 50% of luxury goods are purchased as "opportunistic gifts," but what exactly does this indicate? The conditions of "traditional" Chinese society require a lot of lubrication, and this lubrication is money. Money talks, and the consumption of upper-class consumers or those who use public funds to buy luxury goods doesn't promote normal consumption for [our] society. It actually promotes corruption.

Who's Buying Luxury Goods As Gifts In China?

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Published April 21, 2010

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Who's Buying Luxury Goods As Gifts In China?