China is a world leader in exports in yet another category: the super-rich. And the trend is growing, according to a recent Hurun survey. Sixty-four percent of China’s 393 millionaires questioned have already or are planning to emigrate, a 4 percent increase from the previous year. Headed for permanent residency in Europe and North America, very few want to give up their nationality, although one in three have already emigrated or are planning to do so.
Consumer confidence in China has been trending lower since its high of 124 in 1993, averaging only 109 from 1991 to 2013. This includes the record low of ninety-seven in 2011. The winter months, November through February, traditionally correlate with higher scores, but last November’s score (the latest available) of only 98.9 is about five points lower than the previous November’s.
Millionaires’ confidence rose for the first time in five years, according to the survey, but only 31 percent felt extremely confident. So, they are seeking residency elsewhere, and they are spending their money there as well. Only one-third of luxury spending by mainland Chinese was domestic; the rest was overseas. A contributing factor is the consumption tax on luxury goods of up to 40 percent. As a result of the emigration of the rich and the overseas spending, the United States has once again become the fastest growing luxury market, according to a report issued by Bain and Company in December 2013.
The savvy super-rich are becoming more sophisticated, shopping online for the best prices globally. For global brands that is fine, but for those who had banked on increased luxury buying in China, the news is less than good. Conspicuous spending has been curtailed by President Xi Jinping’s crackdown on graft. The culture of luxury gift-giving has been hit, decreasing the appeal of traditional items like leather, accessories and watches. Education and Healthcare are still booming markets, but these are hardly luxury goods.
This is a game changer for high-end retailers like Louis Vuitton. The Hurun Report shows a continuing decline in overall spending by the wealthy that has already stretched over three years. Overall spending by the rich has fallen another 15 percent and spending on gifts has declined by 25 percent. This leaves the market for Bulgari, Ferragamo and Tiffany thin.