MCLC: life in the fast lane

[Denton, Kirk]

MCLC LIST
From: joe alvaro <jjalvaro at student.cityu.edu.hk>
Subject: life in the fast lane
***********************************************************

Source: LA Times (1/2/12):
http://www.latimes.com/news/nationworld/world/la-fg-china-luxury-20120103,0
,863594.story

CHINESE ARE UP TO SPEED WITH LIFE IN THE FAST LANE
By BARBARA DEMICK, Los Angeles Times, January 2, 2012

Beijing‹Barely a decade ago, Beijing bicyclists pedaled down alleys here
lined with courtyard houses that had no indoor toilets. Now the alleys
have been replaced by a wide avenue lined with Lamborghini, Ferrari,
Bugatti and Rolls-Royce dealerships.

In 2011, Chinese bought more Lamborghinis and Rolls-Royces than anybody
else in the world. In time for Chinese New Year this month, Rolls is
unveiling a ³Year of the Dragon² model with hand-embroidered versions of
mythical animals on leather headrests. Prices start at $1.6 million. China
is on the verge of becoming the leading market for just about everything
over-the-top expensive.

Companies obsessed with China a few years back for its flagrant
counterfeiting now see it as their most promising customer, especially at
a time when so many other nations are scrimping. Gucci¹s sales in China in
the first half of 2011 were up 39%; Bottega Veneta¹s more than 80%. Prada
plans to open 50 shops over the next three years.

Chinese fashionistas are displacing those immaculate Japanese women in
their Burberry scarves as the world¹s leading consumers of luxury goods.
The consulting firm McKinsey & Co. projected that China will bump Japan
out of first place by 2015 as the leading market for pricey goods. Even
with the softening of China¹s real estate market, the source of much new
money, some analysts believe the Chinese already top the luxury market.

In fact, the sales figures understate Chinese spending because the rich
here do much of their shopping abroad to avoid high taxes on luxury items
and electronics. So far, the Chinese haven¹t approached the excesses of
the so-called New Russians, who after the Soviet collapse were quickly
flaunting diamond-encrusted baubles and mega-yachts. After all, China is
still at least nominally a communist country and the culture is rich with
proverbs about the terrible things that can befall you for showing off.
(³A tall pine attracts more wind² and ³Man should avoid fame like a pig
avoids fattening,² to name two.)

Yet for some, conspicuous consumption, particularly in the social media
era, does not seem to be a problem. Young women post photographs of
themselves on microblogs with their Hermes handbags. The son of an auto
tycoon uploaded on the Chinese equivalent of YouTube a video made from
behind the wheel of his $4.5-million Bugatti Veyron sports car as it wove
through traffic in the southern city of Chongqing.

³People are more extroverted. They have no problem showing off their
wealth,² said Klaus Paur, an auto industry analyst and managing director
in the Shanghai office of Synovate Motoresearch. He recalls that when he
came to China in 2003, the wealthy drove large Mercedeses and Audis,
invariably black.
Chinese officialdom has something of a love-hate relationship with luxury
goods, officials relishing their own creature comforts while deploring
anyone else doing it too flagrantly. China still has 150 million people
living on less than $1 a day. And it maintains some of the highest taxes
in the world on luxury goods, adding as much as 60% to the cost‹which is
why rich Chinese have become such prodigious shoppers abroad.

The word shechi, or ³luxury,² is banned in advertising and company names,
said Ouyang Kun, who runs a trade group in Beijing called the World Luxury
Assn. ³The government feels luxury items are only affordable for a few
people. They don¹t want to create unharmonious feelings among the people,²
he explained. The Chinese equivalent of Rodeo Drive is a four-block strip
in the heart of old Beijing along Jinbao Street, whose name appropriately
means ³gold treasure.² The street was built in 2002 out of two traditional
hutongs, or alleys, one named Jinyu, or ³goldfish,² and the other Yaba, or
³mute man,² part of a larger redevelopment project that displaced more
than 4,000 families.

Along the same row as the luxury car dealerships is a branch of Hong
Kong¹s Jockey Club and a seven-story mall where a Bottega Veneta handbag
made of African crocodile skin can set you back $51,000 and a
jewel-encrusted cellphone $132,000. Expensive simply for the sake of
expensive is all the rage. At a trade show on the resort island of Hainan
in November, promoters unveiled a gold-plated toilet costing more than
$200,000.

The recently opened Black Swan Luxury Bakery (that¹s the English name;
it¹s the Black Swan Art Bakery in Chinese because of the ban on shechi)
made headlines with a multitiered, cream-swathed wedding cake in the front
window with a $314,000 price tag. The phenomenon isn¹t limited to Beijing.
Drive through most dusty provincial capitals now and you¹ll see high-end
shops in the center of town, often alongside the People¹s Square‹a popular
name in deference to communist tradition. In Chongqing, a city once famous
for its revolutionary zeal, a five-story Louis Vuitton shop opened in
September, overshadowing the iconic Liberation Monument.

Chinese buyers of luxury goods are generally young adults, in keeping with
the relative youthfulness of the country¹s millionaires (about 15 years
younger than those in the West), according to the Shanghai-based Hurun
Research Institute, which maintains a so-called rich list. ³Our customers
are super-rich, second-generation young people who have inherited money or
whose parents buy them cars,² said Wilson Ho, whose company, Hong
Kong-based Sparkle Rolls, runs the Lamborghini dealership in Beijing.
³Chinese parents love their kids. They¹ll buy them whatever they like.²

Some of the new rich made their money selling cheap, mass-produced
merchandise abroad. For themselves they want only the best. ³It¹s not just
about showing off. People have come to appreciate quality,² said Liu
Lijuan, a young mother who was taking out a Salvatore Ferragamo wallet
from a Louis Vuitton bag to pay for a birthday cake for her 2-year-old
daughter at the Black Swan.

The best increasingly means the real thing. Although knockoffs are still
widely available, a McKinsey poll released in March found that the
percentage of consumers willing to buy fake jewelry had dropped from 31%
in 2008 to 12%. Unlike Western consumers of high-end goods, who usually
buy things for themselves, those in China are shopping for a gift as often
as for themselves, according to market research.

Chinese sometimes use expensive gifts‹whether Montblanc pens or luxury
watches or $100-a-pack cigarettes‹as a way of greasing the wheels while
doing business. Politicians are frequent recipients.
In September, an activist published a report on the wristwatches worn by
government officials based on publicly released photographs that he blew
up and analyzed. Most flashy was the railroad minister, Sheng Guangzu, who
appeared to own at least four luxury watches, including a Rolex, worth a
total of $62,000.

³I can¹t say there is a direct link between expensive watches and
corruption, but you have to ask where they got these items that so
obviously exceed in value their ordinary income,² said the activist,
Daniel Wu.