Chinese and international newspapers are full of reports like this one:
China is poised to become the world's largest luxury goods market in the next five to seven years, according to Boston Consulting Group in its latest survey of Chinese consumer trends released in Beijing yesterday.
"By 2015, 29 percent of global luxury product consumption will come from China, making it the world's largest luxury market," Vincent Lui, principal of Boston Consulting's Hong Kong office, said at a news conference yesterday.
China's booming luxury goods market makes it an oasis of hope for global luxury brands, which are losing ground in other markets.
At present, Shanghai and Beijing have as many luxury point-of-sale locations per capita as both New York and Chicago. Plus, the two Chinese cities have a slightly higher concentration of luxury watch outlets than other major city in the world.
For luxury purveyors, a big part of China's allure is the rapid pace of wealth accumulation.
At the end of 2008, China boasted 417,000 households each with a net worth of more than $1 million in assets under management, according to research by Boston Consulting and leading Chinese banks.
Boston Consulting also pointed out that this category is expanding quickly and is expected to top 609,000 households by the end of 2011.
However, foreign investors (and other decision makers) should understand that the Chinese bubble will burst before long. Lawrence Solomon, writing in the Canadian National Post, looks at the other side of the China story:
China’s stability today is more precarious than was the Soviet Union’s before its fall. China’s poor are poorer than the Soviet Union’s poor, and they are much more numerous — about one billion in a country of 1.3 billion. Moreover, in the Soviet Union there was no sizeable middle class — just about everyone was poor and shared in the same hardships, avoiding resentments that might otherwise have arisen.
In China, the resentments are palpable. Many of the 300 million people who have risen out of poverty flaunt their new wealth, often egregiously so. This is especially so with the new class of rich, all but non-existent just a few years ago, which now includes some 500,000 millionaires and 200 billionaires. Worse, the gap between rich and poor has been increasing. Ominously, the bottom billion views as illegitimate the wealth of the top 300 million.
How did so many become so rich so quickly? For the most part, through corruption. Twenty years ago, the Communist Party decided that “getting rich is glorious,” giving the green light to lawless capitalism. The rulers in China started by awarding themselves and their families the lion’s share of the state’s resources in the guise of privatization, and by selling licences and other access to the economy to cronies in exchange for bribes. The system of corruption, and the public acceptance of corruption, is now pervasive — even minor officials in government backwaters are now able to enrich themselves handsomely.
But China is a powder keg, waiting to explode, says Solomon:
The government tries to tamp down the outrage over the abuses inflicted on the public by banning demonstrations and censoring the Internet. But it is failing. Year by year, the number of demonstrations increases. Last year alone saw 100,000 such protests across the county, directly involving tens and indirectly perhaps hundreds of millions of protesters.
China is a powder keg that could explode at any moment. And if it does explode, chaos could ensue — as the Chinese are only too well aware, the country has a brutal history of carnage at the hands of unruly mobs. For this reason, corrupt officials inside China, likely by the tens of thousands, have made contingency plans, obtaining foreign passports, buying second homes abroad, establishing their families and businesses abroad, or otherwise planning their escapes. Also for this reason, much of the middle class supports the government’s increasingly repressive efforts.
Read the entire arcticle here.