Business
China may start taxing more luxury goods
China Daily, May 25, 2013
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China's luxury-goods market is likely to grow by a world-leading 20 percent this year, accounting for more than a quarter of global luxury sales, according to a recent report by Deutsche Bank AG. The bank's economists believe that, despite several months of sluggishness in various economic indicators in China, the second-half outlook remains positive.
That's partly due to weak inflation and the foreseeable likelihood of China's central bank keeping interest rates low to spur consumer spending.
"It's hard not to be optimistic about the future of luxury goods in China," said John Zhang, a marketing professor at the University of Pennsylvania's Wharton School.
"Chinese people have always tried hard to enjoy better things in life even in bad times, and there's still a good deal of pent-up demand," he said.
"In addition, the Chinese economy is still growing at a very fast pace, relative to every other economy in the world, despite its recent slight slowdown."
Zhang believes that while the high level of income inequality in China is bad for other sectors, it tends to equate to fast growth in sales of luxury products.
The Deutsche Bank report says sales could be affected by Chinese government policies on consumer spending and travel.
Last year, authorities introduced bans on officials' use of public money to buy luxury items.
According to Zhang, sales could hit a speed bump, but the effects would likely be short lived. In the long term, nothing short of prohibitions will stop deep-pocketed Chinese consumers from snapping up the finer things in life.
"For instance, anti-corruption policies have slowed down conspicuous spending on banquets in fancy hotels. However, consumption in private clubs and in less conspicuous restaurants picked up," the professor said. "I think that both consumers and luxury-goods manufacturers will quickly find ways to adapt to the new environment."
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