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Beware of extravagance before joint prosperity

By Li Ning: 0 Comment(s)Print E-mail China.org.cn, June 24, 2011

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China's rapid economic growth has sharply improved living standards and helped raise hundreds of millions of people out of extreme poverty. It has also minted a class of parvenus with growing incomes and a keen appetite for luxury goods. China's middle class is expected to reach 104 million people in 2011. Its bulging ranks have become a key customer base for luxury brands worldwide, for whom China has become the second largest market after the United States.

It would be nice to see China become the world's largest luxury goods consumer market and enjoy a higher quality of life than ever before. But the country should also guard against the negative effects of conspicuous consumption. Chinese people are indulging in luxury even as much of China struggles in poverty. Resources intended for social development are being wasted on Audis and Louis Vitton bags. It is unsustainable.

Although China has surpassed Japan to become the world's second largest economy, its per capita income still lags far behind. In China, 90 percent of the populations are struggling for a better life. Only a small, elite few can afford luxury goods. The consumption of this privileged minority doesn't mean China can afford a life of luxury at its current stage of development. Moreover, the increasing prevalence of luxury products has increased awareness of the country's broadening gap between rich and poor. Resentment of the rich poses a significant challenge to China's social stability.

The China Youth Daily said there are three motivations underlying Chinese luxury consumption: showing off; returning favors and spoiling themselves. Especially if a large part of luxury goods purchased encourages corruptions and abuse of power, the country should pay more attention to the governance of such consumption. China shouldn't risk the fruits of its social development just to become the biggest consumer of luxury goods.

China's economic structure still needs improvement. The underdevelopment of its private and service sectors has slowed economic growth. What China needs most is to put money into smart investment rather than luxury consumption. China should foster more private enterprises rather than pour money into inefficient government-led investment and state-owned monopolies.

If China becomes extravagant before it achieves widespread prosperity and squanders the hard-earned gains of its booming economy, it may kill its chances of becoming a rich nation.

The Ministry of Commerce recently released plans to lower customs duties on high-end products to reduce the number of people purchasing luxury items abroad. The gap between domestic and foreign prices for these goods needs to be addressed. But cutting down on extravagance in Chinese society is still more urgent. If luxury consumption gets out of hand, development will become unsustainable.

(This article was first written in Chinese and translated by Li Huiru.)

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