Does The Financial Crisis Affect High-End Luxury Consumption?

When Americans are frugal to cope with the economic crisis, Beijing's "Fifth Avenue" -- developers of Jinbao Street expect Chinese consumers to open their purse strings: do anyone want a brand sofa worth $22 thousand?

Beijing Jinbao Street brings together luxury hotels, nightclubs and stores. According to Yao Ning, marketing manager of Fuhua International Group, which is responsible for the project, it aims at "the richest and most successful people in China" in Hongkong.

When the main street project of the mall is opened in February next year, the elite of Beijing will be able to pick up the French Bugatti sports car or the Italy famous brand sofa - "all things that Chinese have never seen before."

Yao said enthusiastically.

This huge consumption is unthinkable in chairman Mao Zedong's simple times. In this country that has always been careful to save money and unwilling to spend money in big hands, it represents a huge cultural change.

It helps to decide whether China's economy will slow down a little in the next few months or suffer from a more serious situation.

Over the past 20 years, exports have been the main engine of China's rapid economic growth, but with the sharp reduction in orders worldwide, the burden of reversing the decline may now be on the shoulders of consumers.

Yao Ning said that his high-end clients are prepared to spend a lot of money. "The recent changes in the economic situation mean that their investment will be reduced, but consumption will not be".

In the lane next to Jinbao Street, Hao Zhilong, the retired man of his tricycle, said that the newly opened shop is only for the wealthy and foreigners in China. We usually go through the window.

I never went in, and most of us could not afford to buy it.

But similar development and expansion is continuing. Hao said his house will be demolished next year to make room for another luxury shopping center.

Owing to the long hard years before the reform and opening up in the late 70s of last century, and the lack of social security, Chinese people used to save money.

According to a recent survey by McKinsey, a consultancy, the average household in China saved about 28% of their income. By contrast, the savings rate of American households is close to zero.

However, the tradition of frugality may change in the new generation.

He Xiumei, a 41 year old citizen of Beijing, is choosing sofa, not in Jinbao Street, but in the much shabby Shili River furniture market, where each sofa sells for about 300 dollars.

"Who can buy expensive things like the nouveau riche?"

She said.

But she said her son at university was eager to accept the American credit culture.

"I don't understand why he wants credit cards. I don't want to owe them all my life, but he says many of his classmates have, so he wants to."

Initial signs suggest that the younger generation of China may gain the upper hand.

Lu Ting, an economist with Merrill Lynch in Hongkong and T-J- Bond, said that despite the slowdown in manufacturing growth, the strong growth in retail sales in October brought hope to the Chinese economy.

They predict that the government's measures to stimulate consumption will offset the slowdown in export growth and help China achieve a growth rate of around 8.6% next year.

Colin, Spykman, an expert on Chinese issues at the American Foreign Exchange Association recently wrote in China Daily: "this is ironic. Chinese consumers have always been cautious about increasing their consumption. At that time, the terrible consequences of Western consumers never saving money for hard times are obvious."

Anyway, the distribution Hall of Rolls-Royce luxury car located on Jinbao Street is not bad.

Lu Huan, a salesperson, said that the sales volume of $about 1000000 Rolls-Royce has increased from 9 in 2006 to 30 in 2007, and then to 50 in 2008.

"The slowdown has affected the confidence of some Chinese consumers."

Lu said, "but high-end consumers still have money to spend."

Yang Jing: editor in charge