Luxury in China loses lustre as wealthy flee

Thu Jan 16, 2014 4:32am EST
 
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By Clare Baldwin

HONG KONG Jan 16 (Reuters) - Wealthy Chinese are likely to buy fewer luxury goods again this year after the steepest cut-back on spending in at least five years, changing the game for high-end retailers like Louis Vuitton which have staked their growth on China.

Overall spending by wealthy Chinese fell by 15 percent in 2013, the third consecutive year of decline, according to a survey by the Hurun Report. Spending on gifts in particular also declined by a quarter.

The drop coincides with a government crackdown on corruption and gifting, as well as an a growing penchant for travelling and shopping overseas to circumvent Chinese consumption taxes on luxury goods as high as 40 percent.

One in three so-called high net worth individuals have already left, or are planning to leave, China, the report showed, a factor that has also reduced luxury spending.

Most of these rich have emigrated, or considering it, to seek better opportunities for their children's education, a 2011 Hurun survey showed.

"In terms of traditional luxury - leathers, accessories, watches - this year is going to be flat if not a little bit down," Hurun Report founder and chief researcher Rupert Hoogewerf told Reuters.

"For luxuries like tea, healthcare, even education, we are still looking at a booming market."

The crackdown on conspicuous spending, which began in 2012, is part of a vow made by Chinese President Xi Jinping to be tougher on graft. He has focused in particular on gifts made to government officials often in exchange for preferential treatment or contracts.   Continued...