Economy

Why The Luxury Market In China Has Taken A Sudden Dive

XINHUA NEWS, CHINA BUSINESS TIMES (China)

Worldcrunch

SHANGHAI - Not so long ago, the world’s luxury brands were enjoying the rapid development of the Chinese market, but since the end of 2012, this trend has taken a sharp downwards turn.

As Xinhua News pointed out, even though in 2011 the GDP per capita in China ranked 86th in the world, it somehow surpassed Japan, making it second on the list of the largest luxury goods consumers, right after the U.S. But, according to a study conducted by Bain & Company, China’s luxury goods consumption growth rate was only 7% in 2012, far smaller than the 30% growth rate two years ago.

The latest report from the World Luxury Association also shows that from January 20 to February 20 of this year -- during peak gift-purchasing time for the Chinese New Year -- the Chinese luxury market consumption totaled $830 million, which represents a steep 53% drop in sales in comparison with the same period last year, the China Business Times reported.

Since taking office late last year, China’s new leaders have introduced the so-called “New Eight Provisions” which advocates frugality and aims to rectify Chinese officials’ pompous waste of public money and the collusion of trading favors for expensive gifts.

In adapting themselves to the characteristics of the Chinese consumer market, many of the global brands’ Chinese branches "do as the Romans do" and used to give Chinese shoppers maximum convenience.

For instance, an employee, who wished to remain anonymous, at Prada in Shanghai told the Xinhua reporter that their luxurious leather goods can be invoiced either as a gift or expenses for work as the client requires.

Another employee from a different high-end brand added that this year has seen the tax office closely inspecting their accounts. Apart from the jewelry and watches that they are still able to invoice as leather goods, they hadn’t been able to sell other items under the etiquette of office supplies so their sales have declined by 20%.

The China Business Times observed that, since January, news has been continuously trickling through that Gucci, Louis Vuitton and other labels will be slowing their expansion in China. Louis Vuitton’s executives declared that they would not continue to open new shops in second and third tier cities. Gucci announced it will maintain its current number of stores in China in 2013.

A visit to any of Shanghai’s swanky apparel boutiques shows that the number of customers in any of these shops has dramatically shrunk. A Givenchy store on Shanghai’s lively Nanjing road recently closed after undergoing a stock clearance sale.

“The expansion of luxury brands has been unable to continue in China. The vast majority of brand sales last year did not reach the goals set at the beginning of the year. Some of them saw a drop of more than 30%. This is rare in recent years,” stated an executive of a world-renowned luxury goods group to the China Business Times before further pointing out: “This has to do with the huge price difference between these goods sold in China and sold abroad, as well as the overall economic environment. But it is also related to the fact that spending public money is now much more restricted.”

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Preparing a COVID-19 vaccine booster in Huzhou, China.

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👋 Ciao!*

Welcome to Wednesday, where Brazil's senate backs "crimes against humanity" charges against Jair Bolsonaro, the UN has a grim new climate report and Dune gets a sequel. Meanwhile, German daily Die Welt explores "Xi Jinping Thought," which is now being made part of Chinese schools' curriculum.

[*Italian]

🌎  7 THINGS TO KNOW RIGHT NOW

• Senators back Bolsonaro criminal charges: A Brazilian Senate panel has backed a report that supports charging President Jair Bolsonaro with crimes against humanity, for his alleged responsibility in the country's 600,000-plus COVID-19 deaths.

• Gas crisis in Moldova following Russian retaliation: Moldova, one of Europe's poorest countries, has for the first time challenged Russia's Gazprom following a price increase and failed contract negotiations, purchasing instead from Poland. In response, Russia has threatened to halt sales to the Eastern European country, which has previously acquired all of its gas from Gazprom.

• New UN climate report finds planned emission cuts fall short: The Emissions Gap Report 2021 concludes that country pledges to reduce greenhouse gas emissions aren't large enough to keep the global temperature rise below 1.5 °C degrees this century. The UN Environment Program predicts a 2.7 °C increase, with significant environmental impacts, but there is still hope that longer term net-zero goals will curtail some temperature rise.

• COVID update: As part of its long-awaited reopening, Australia will officially allow its citizens to travel abroad without a government waiver for the first time in more than 18 months. Bulgaria, meanwhile, hits record daily high COVID-19 cases as the Eastern European's hotel and restaurant association is planning protests over the implementation of the vaccination "green pass." In the U.S., a panel of government medical advisors backed the use of Pfizer COVID-19 vaccine for five to 11-year-olds.

• U.S. appeals decision to block Julian Assange extradition: The United States said it was "extremely disappointed" in a UK judge's ruling that Assange, the founder of Wikileaks, would be a suicide risk of he traveled across the Atlantic. In the U.S., he faces 18 charges related to the 2010 release of 500,000 secret files related to U.S. military activity.

• Deposed Sudan prime minister released: Prime Minister Abdalla Hamdok has been released from custody, though remains under heavy guard after Sudan's military coup. Protests against the coup have continued in the capital Khartoum, as Hamdok has called for the release of other detained governmental officials.

Dune Part 2 confirmed: The world will get to see Timothée Chalamet ride a sandworm: The second installment of the sci-fi epic and global box office hit has officially been greenlit, set to hit the screens in 2023.

🗞️  FRONT PAGE

Front page of the National Post's October 27 front page

Canadian daily National Post reports on the nomination of Steven Guilbeault, a former Greenpeace activist, as the country's new Environment minister. He had been arrested in 2001 for scaling Toronto's CN Tower to unfurl a banner for Greenpeace, which he left in 2008.

📰  STORY OF THE DAY

Chinese students now required to learn to think like Xi Jinping

"Xi Jinping Thought" ideas on socialism have been spreading across the country since 2017. But now, Beijing is going one step further by making them part of the curriculum, from the elementary level all the way up to university, reports Maximilian Kalkhof in German daily Die Welt.

🇨🇳 It's important to strengthen the "determination to listen to and follow the party." Also, teaching materials should "cultivate patriotic feelings." So say the new guidelines issued by the Chinese Ministry of Education. The goal is to help Chinese students develop more "Marxist beliefs," and for that, the government wants its national curriculum to include "Xi Jinping Thought," the ideas, namely, of China's current leader. Behind this word jam is a plan to consolidate the power of the nation, the party and Xi himself.

📚 Starting in September, the country's 300 million students have had to study the doctrine, from elementary school into university. And in some cities, even that doesn't seem to be enough. Shanghai announced that its students from third to fifth grade would only take final exams in mathematics and Chinese, de facto deleting English as an examination subject. Beijing, in the meantime, announced that it would ban the use of unauthorized foreign textbooks in elementary and middle schools.

⚠️ But how does a country that enchants its youth with socialist ideology and personality cults rise to become a world power? Isn't giving up English as a global language the quickest way into isolation? The educational reform comes at a time when Beijing is brutally disciplining many areas of public life, from tech giants to the entertainment industry. It has made it difficult for Chinese technology companies to go public abroad, and some media have reported that a blanket ban on IPOs in the United States is on the cards in the next few years.

➡️ Read more on Worldcrunch.com

📣 VERBATIM

"I'm a footballer and I'm gay."

— Australian soccer player Josh Cavallo said in a video accompanying a tweet in which he revealed his homosexuality, becoming the first top-flight male professional player in the world to do so. The 21-year-old said he was tired of living "this double life" and hoped his decision to come out would help other "players living in silence."

🇸🇩💥  IN OTHER NEWS

Why this Sudan coup d'état is different

Three days since the military coup was set in motion in Sudan, the situation on the ground continues to be fluid. Reuters reports this morning that workers at the state petroleum company Sudapet are joining a nationwide civil disobedience movement called by trade unions in response to the generals' overthrow of the government. Doctors have also announced a strike.

Generals in suits At the same time, the military appears firmly in control, with deposed Prime Minister Abdalla Hamdok allowed to return home today after being held by the coup leaders. How did we get here? That's the question that David E. Kiwuwa, a professor of international relations at the University of Nottingham, takes on in The Conversation:

"Since the revolution that deposed Omar el-Bashir in 2019, the military have fancied themselves as generals in suits. They have continued to wield enough power to almost run a parallel government in tension with the prime minister. This was evident when the military continued to have the say on security and foreign affairs.

Economy as alibi For their part, civilian officials concentrated on rejuvenating the economy and mobilizing international support for the transitional council. This didn't stop the military from accusing the civilian leadership of failing to resuscitate the country's ailing economy.

True, the economy has continued to struggle from high inflation, low industrial output and dwindling foreign direct investment. As in all economies, conditions have been exacerbated by the effects of COVID-19. Sudan's weakened economy is, however, not sufficient reason for the military intervention. Clearly this is merely an excuse."

➡️ Read more on Worldcrunch.com

#️⃣  BY THE NUMBERS

471 million euros

Rome's Casino di Villa Boncompagni Ludovisi, better known as Villa Aurora, will be put up for auction in January for 471 million euros ($547 million). The over-the-top price tag is thanks to the villa having the only known ceiling painting by Renaissance master Caravaggio.

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Who wants to start the bidding on the Caravaggio villa? Otherwise, let us know what the news looks like from your corner of the world! info@worldcrunch.com!

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