China, Socialism & Consumer Behavior

Ferrari Store
credits: shanghaidiaries.com

With the opening to new markets and the growth of the Chinese economy, a new social class has emerged — to some extend, unthinkable in a Communist China: the millionaires. According to a survey from Cap Gemini/Merrill Lynch, the number of millionaires (in US Dollars) in China have reached more than 230,000. The large majority of these new riches choose Shanghai to invest their money and also spend their money. And these new riches can by quite demanding consumers: Yang Qingshan — secretary-general of the Chinese Strategy and Branding Association — says that more and more Chinese people invest in luxury items, such as cars, watches, designer clothes, accessories and cosmetics.

Seeking to target such people, new businesses that will recently were unthinkable in the “Empire of the Center”: the Millionaire’s Fair — event organized by the Millionaire Magazine, held for the first time in 2001 em Amsterdam — since then showcased products in countries such as France, Belgium and Holland, was hosted for the first time in an Asian country this year, in Shanghai.

Despite of the poor infrastructure, the e-commerce is also flourishing in China, fueled by so many wealthy clients: the number of online business in China surpasses 20 million.

Several luxury brands from all over the world have been attracted by these consumers: Dior, after opening several stores in china which sells over 11 million Yuan an year — something around 1.3 million dollars–, recently opened a Dior Center in Shanghai, the third in the world after Paris and Tokyo, hoping to reach 15 million Yuan in annual revenues.

The luxury automobile industry was to first to acknowledge such market potential, and for years have been harvesting fruits of their investment in Asia: 3 of 4 most expensive units manufactured by Bentley last year, each one costing more than 8 million Yuan — something around 1 million dollars, were bought by Chinese millionaires; 15% of all the limousines manufactured by Rolls-Royce had Asia has their buyers.

Despite of such explosion of consumption, the ordinary joe in China still keeps his money under the mattress: the Chinese National Savings is over 9 trillion Yuan– a little over 1 trillion dollars, representing 45% of the Chinese Gross National Product (GNP). As a comparison, Brazilian National Savings — also an emerging economy, goes around 25% of the Brazilian GNP. The rate of consumption over the Chinese GNP doesn’t go over 50%, much lower the the overall world average of 80%.

Nevertheless, the Chinese Central Government doesn’t want their comrades to stray away and recently created a system to overtax luxury items, trying to discourage spending and promote socialist values.