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Luxury goods market dented by gov't policies

China Daily, December 13, 2012

• Tightened policies on government spending for luxury goods in China have put a temporary cap on the buying of luxury goods as gifts, which has contributed to the slowest annual growth of the market in five years.

  That's according to the findings of the latest Bain & Co report released on Wednesday. The consultancy predicted luxury sales on the Chinese mainland to grow a meager 7 percent this year.

  Gift spending, as a share of total luxury spending, has dropped 5 percentage points year-on-year to about 25 percent, said Bruno Lannes, partner of Bain in China and lead author of the China Luxury Market Study.

  He cited a government regulation, effective from October, forbidding government spending on extravagant items, as well as the social media exposure of a number of government officials with luxury goods brands.

  Lannes said products for men will be hardest hit by the changes. "Basically, it's watches and menswear that are most reliant on gift spending."

  However, the sector is likely to rebound next year because gifts have been a major feature and tradition of the country's luxury market for years.

  Lannes predicted there will be a paradigm shift, and said future gift items will likely have less conspicuous branding.

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