China’s consumers are pushing the nation to the top once again.
It will overtake Japan this year to be the country with the biggest appetite for luxury goods, HSBC predicts in a research report issued late last week. The broker said that it expects China’s consumers to keep spending, even if their affluent counterparts in the West stop.
The reasons are, at least in part, cultural. “Displaying wealth has become a trend in China, and we think this will continue to translate into growing purchases of luxury goods for oneself, or as gifts,” HSBC said. “We think consumer habits may not necessarily always correspond to income levels due to the need to socially fit in and show off wealth.”
It added a historical note: “In Chinese and Russian communist societies, individual property was not allowed and private wealth was traditionally suspicious. With the liberalization of the economy, a new class system was created where your place on the ladder may depend on how much money one earns, and owning luxury goods can help display the level of one’s wealth.”
Social changes occurring around the world, such as people marrying later, women’s growing financial independence and increasing brand awareness, may also be fueling the growth in China, HSBC said.
China has some 1,363 people with wealth of more than 1 billion yuan (roughly $157 million), up 36% from last year, HSBC said, citing statistic from the Hurun Rich List 2010. About 189 qualify as USD billionaires.
Watches and jewelry, in particular, stand to benefit from growing luxury demand in the region. In the first half of 2011, China overtook France as the third-largest importer of Swiss watches, growing 49% from the year-earlier period, HSBC said.
Hong Kong, where watch retailers line some streets of upscale neighborhoods like Central, saw imports grow 28%. In addition, watchmakers such as Richemont and Swatch may gain from expected cuts to import taxes in China.
Jewelry is even better poised than watches, according to HSBC, with the growing spending power of Chinese women working in the industry’s favor.
“There were almost 197 million women between the ages of 30 and 49 in 2009, representing almost 17% of the total population. This target audience,” HSBC said, “has huge potential as these women become more-engaged luxury consumers.” Local retailers like Luk Fook and Chow Sang Sang, as well as global players like Tiffany, are already catering to these consumers.
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