| HONG KONG
HONG KONG Jan 16 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.
As a result, many wealthy Chinese now buy luxury goods for
themselves, rather than as gifts, Hoogewerf said.
Products by Hermes, Chanel, LVMH's Louis Vuitton
brand, Apple Inc and Gucci remained among the
most sought-after brands for gifting, the survey showed.
Less popular were Bulgari - another LVMH brand - Salvatore
Ferragamo, Tiffany and Co and the fiery baijiu
liquor made by Chinese firm Kweichow Moutai Co Ltd,
once the top tipple of Communist Party officials.
Luxury firms are already grappling with a slowing economy in
China and a more sophisticated clientele that shops online for
the best price globally and eschews in-your-face logos.
Affluent Chinese have also become more confident about
mixing high-street clothing and accessories with branded goods
for an individual look.
"There is a much savvier consumer out there," Hoogewerf
said. "There will be more purchasing done overseas than in
China. For a brand that's global it's fine."
Over two-thirds of luxury spending by mainland Chinese was
overseas in 2013, a factor that contributed to the United States
overtaking China as the world's fastest growing luxury market,
according to a study by consultancy firm Bain & Company released
China's super-rich are also avid collectors - 70 percent of
wealthy Chinese rank collecting as a hobby - but what they are
coveting is changing.
Ancient calligraphy last year surpassed luxury watches as
the most-collected, knocking watches out of the No. 1 spot for
the first time in five years, the Hurun report showed, which
could mean revenue losses for top watch makers but a boon for
Patek Philippe remained the most popular watch brand for
collectors for the seventh year running while Christie's was the
top ranked foreign auction house, the report showed.
Besides spending less at home, more rich Chinese are leaving
the country. The number of wealthy Chinese who have emigrated or
are planning to do so rose to 64 percent from 60 percent in the
previous year, the survey said.
Most of those leaving, or planning to, are looking for
permanent residency overseas - the United States, Europe and
Canada are top picks. Very few want to give up their
nationality, perhaps because their outlook for China is
The report showed millionaires' confidence in China's
economy rose for the first time in five years but those who felt
"extremely confident" still accounted for only 31 percent of
The survey's results are based on responses from 393 Chinese
millionaires, or those with personal wealth of at least 10
million yuan ($1.65 million). The Hurun Research Institute has
conducted the survey for the past 10 years.