In the luxury market, dress takes up 32% of the total value, perfume and cosmetics 23%, watch and jewelry 20%, ornaments and accessories 19%, home 3% and dinning table decorations 3%.

According to statistics of the General Administration of Customs of China, export volume of the top six international clothing brands to China –  LV, Gucci, Dior, Versace, Prada and Fendi — has increased year by year since 2005 and their sales revenue in China is also on the upward trend.

Top Six Luxury Dressing Brands Export to China, 2005-2007
(unit: CNY10,000)

Source: ResearchInChina

The Chinese State Council — China’s Cabinet — held an executive meeting earlier this year noting the significance of energy savings and made a special call on the country’s auto industry to cut back on gas consumption.

But no exact standard or details of when the tax would be raised or when it would happen were released.

The Chinese State Administration of Taxation (SAT) sources said the agency had held multiple discussions on the consumption tax rise. A draft plan had come out, but the final decision was yet to come.

Reflecting the anticipation of such a tax rise, some consumers in China may push forward their purchasing plans. This has led to a rise in import luxury car sales.

China Automobile Trading Co Ltd (CATC) figures show from January to May, 26,992 large car were imported. This comprised a 41.38 percent share of total car imports. Sport utility vehicles (SUVs) imports in the first five month surged 91.3 percent over same period last year.

One Chrysler dealer in Guangzhou, capital of the southern Guangdong province, said the possible tax rise was prompting potential buyers to push forward their planned purchases. As such, the dealership was stopping its discounts activities designed to attract clients.

The tax rise, if realized, would have the biggest impact on auto producers from the European Union (EU) and Japan as luxury cars mainly came from those two regions, according to customs figures of some major car consuming areas in China.

The trend would be seen in not only first-tier cities like Shanghai and Beijing, but also their satellite towns and second-tier cities, the advisers told a recent business forum.

China’s emerging middle class has been “a reality,” especially over the past five years, and retail markets were already established and competitive in first-tier cities like Beijing and Shanghai, the Chief Executive Officer, Janet de Silva, of a Hong Kong-based Retail China marketing and branding firm said.

“I believe that the middle-class consuming market will do a lot to help stabilize what will be some offsets in China because of the slowdown in certain parts of manufacturing,” de Silva said, referring to the export sector.

She said consumer spending, though growing quickly, was contributing only about 20 percent to China’s GDP growth at present, compared to 35 percent contributed by exports.

But surveys have shown that China’s emerging middle class, many of whom are skilled technicians and white-collar employees working with multinational firms, “strongly associate international brands with tastes and success.” The middle-class buyers were obviously expanding beyond the first-tier cities into the suburbs and the second-tier cities, with some 10 satellite towns, each with a population of about 1 million, planned for Shanghai, for instance, she said.

Viveca Chan, whose marketing firm operates in Beijing, Shanghai and Hong Kong, said Chinese consumers were turning from shopping for “outward recognition to inner substance” of consumer goods.

But de Silva was also quick to warn that international retailers often run the risk of unrealistic expectations for the Chinese consumer market.

“One-point-three billion people does not mean 1.3 billion shoppers,” she said.

She cited a case to show that Hong Kong, with a population of about 7 million willing to pay HK$350 (US$45) on average for a mother and baby product, is a larger market than the city of Chongqing, with over 30 million people.

Chongqing would become “commercially viable” for the product by 2015, but Shanghai was soon expected to overtake Hong Kong.

As the number of millionaires continues to grow in China, the country attracks more and more events targeted for the rich and famous: the annual Top Marques luxury fair returned to the Shanghai International Convention Center in Pudong yesterday with nearly 300 rare exhibits including roadsters, yachts, works of art and antiques.

The four-day event is expected to attract more than 30,000 visitors, mostly customers invited by the exhibitors and senior staff from wealthy companies in banking, energy resources and IT, according to Sheng Lei, the general manager of the event organizer, Borrison Expo.

Sheng said visitors are expected to spend 500 million yuan (US$66.7 million) on the luxury items. The expensive products include a villa in Sanya, Hainan Province, costing more than 100 million yuan, a Spyker car worth more than 400 million yuan and a 250-million-yuan Schimmel piano.

Fancy cars have always been the highlight of the Top Marques. This year, it has brought to China an Aston Martin D89 - the car driven by Daniel Crag in Casino Royale, the latest 007 incarnation. Priced at 380 million yuan, the roadster is waiting for its first owner in China. Other leading car makers such as Porsche, Ferrari and Cadillac have also brought their 2008 models.

While Top Marques luxury fair in Shanghai still hits the headlines with record transactions, the northeast is catching up with being posh as well. Luxury consumption is no longer a characteristic found during the golden week. In major cities such as Shenyang, Harbin and Changchun, many top global brands have penetrated these markets with exclusive counters and stable audience.

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.