Luxury Market in China
GBE 790 – Doing Business in China
“China’s Luxury Market, 30 years in the making:
How Chinese political policy and tradition over the last 30 years created China’s insatiable appetite for luxury goods”
China is positioned to become the world’s largest luxury market in five years and a study by Datamonitor reported China’s luxury goods market was worth $9.4billion by the end of 2009, which accounted for 27.5% of the world’s luxury goods market. They also predict that by 2015, China’s market will be valued at $14.6billion. The main driver of this growth in the luxury gods market is the extreme wealth creation that China has experiences in the past ten years as its GDP has grown 10% annually on average, which is three times more than the global GDP. Investment Week quotes a recent World Wealth Report by Merrill Lynch Cap Gemini stating that there are 477,000 Chinese millionaires and China is also leading the world with the number of billionaires (Investment week.) The combination of the staggering growth of the Chinese economy creating such great private wealth and the political and social evolution China has gone through over the last 30 years has created a tidal wave of opportunity for luxury retailers.
Politically, China has gone through many changes over the last thirty years that has primed the economy and citizens for a surge in individualism and the pride in the ability to afford and purchase luxury goods. In 1976 Mao Zedong passed away and in 1979 the One Child Policy was introduced and applied by China’s new leader, Deng Xiaoping. China’s population was growing at an alarming rate and in order to curb this growth rate, Chinese were limited to having one child per household. Fast-forward thirty years and these only children, who have been raised by 6 parents, has created a “little emperor” mentality where their every desire it met, and is recently being satiated by Western goods.