China’s wealthiest lavished 500 million yuan, or $63 million, on Hennessy spirits, Porsche sedans, South African diamonds and other luxury goods during a show in Shanghai, double the value of transactions a year ago.
Top Marques, a four-day show that has its origin in Monaco, attracted 12,000 visitors last week with exhibits of 70 luxury brands, including $300,000 De Bethune watches and $426,983 Lamborghini sedans.
"China has embraced every aspect of luxury pursuits, whether it’s hunting, gambling, jets or yachting," said Peter Thompson, a partner of the yacht broker Cavendish White, whose clients include the U.S. tycoon Donald Trump. "There are a lot of rich people, and they have a desire to explore new ways of life."
The nation’s luxury-goods market is growing as much as 60 percent a year and has been targeted by luxury retailers like Prada Holding, Bulgari and Valentino. Economic growth that has averaged 9.7 percent a year since 1978 has created an estimated 300,000 U.S.- dollar millionaires in China, spurring demand for designer brand clothing, jewelry and watches.
"China is a future market for us," said David Zanetta, president of De Bethune, who was marketing the Swiss company’s $300,000 timepiece for the first time in China. "We target the very rich, not the mainstream."
Shanghai is China’s commercial capital and richest city. Saks plans to open its first luxury store in Shanghai in 2008, to sell fine designer apparel, shoes, jewelry, accessories, handbags, fragrances and cosmetics.
The show originated from Top Marques Monaco, an event opened by the former "James Bond" actor Roger Moore and located in Monte Carlo. It debuted in Shanghai last year with more than 8,000 select visitors and cars including brands like Saleen, Maybach, Lamborghini, Spyker, Maserati and Hummer being sold.
LVMH Moët Hennessy Louis Vuitton, the world’s largest luxury goods maker, plans to open two to three stores a year in China, where sales are rising 50 percent annually. Financièr Richemont, the world’s second-biggest, expects to quadruple sales in China within five years by selling more Cartier jewelry and Piaget watches.
Honda Motor in September started selling luxury Acura brand cars in China to compete with Audi and BMW in the world’s fastest-growing consumer market.
Yachting is at the top end of the luxury market, said Ivan Liu, China marketing director of Sunseeker International, a British yacht company that has sold eight yachts in the country worth at least $2 million each.
"People buy yachts only after they own Ferrari," Liu said at the show. "Many Chinese entrepreneurs can afford yachts, but only really adventurous ones would buy them."
A growing income disparity between the country’s new rich and its poorest rural peasants has created unrest among farmers and workers. Prime Minister Wen Jiabao has said the need to address "social harmony" in the country is a priority.
About 200 million Chinese live on less than $1 a day, according to 2004 World Bank estimates. Mass protests in China increased to more than 87,000 last year from 10,000 in 1994, according to government figures.
China’s richest person, the paper-recycling entrepreneur Zhang Yin, has amassed a fortune of $3.4 billion, according to the annual China Rich List, compiled by the Shanghai-based researcher Rupert Hoogewerf.
LVMH Moët Hennessy Louis Vuitton, Burberry Group and other luxury companies are moving to protect rising sales in China by urging the Chinese government to crack down on rampant piracy in the country.
China’s fake goods industry costs overseas companies an estimated $60 billion a year, according to the U.S. government. China made 50 percent of the counterfeit goods seized in the European Union in the first 11 months of last year, down from 70 percent in 2004, according to the EU Tax and Customs Commission. Of $138 million in knockoffs confiscated by U.S. Customs in 2004, 63 percent came from China, inspectors said.
The deputy prime minister of China, Wu Yi, vowed to crack down on counterfeiters when she met with the U.S. trade representative, Rob Portman, on April 11 in Washington. President Hu Jintao repeated the pledge to President George W. Bush during an April 20 visit to the White House.
Though the culture of luxury consumption in China is not yet mature, the market will expand quickly, Thompson said.
"The next generation of Chinese entrepreneurs, who are often educated outside China, will spend more on luxury products because they won’t know what it means to be without money," he said.