Chinese Luxury Brands Feel Impact Of Gift-Giving Plunge

April Rudin

21 January 2014

April Rudin, chief executive and founder, The Rudin Group, a regular contributor to the pages of Family Wealth Report, sister publication of this news service, talks about Asia developments. Here, she gives some brief impressions of how patterns of travel and spending throw light on what is happening in China, the world’s second largest economy. While her views are her own and not necessarily shared by the editors, we are pleased to share these thoughts with readers and invite people to respond.

If you read reports in the US/UK, it appears that luxury brands and the wealthy are a marriage made in heaven. While in Shanghai this week, I happened to read an article in the China Daily that reports otherwise.

According to a report by Hurun Research Institute, Chinese billionaires with assets of at least 10 million yuan ($1.65 million) were less generous with their luxury spending this year over last. Not only did the number of gifts they gave decline by 25 per cent but the average cost per gift also declined according to the tenth Chinese Luxury Consumer Survey released last week.

The Hurun Research Institute follows the lifestyles of the wealthiest people in China. And not only were they more conservative with giving gifts, their own spending fell by 15 per cent last year.

According to the article in the China Daily, some of the reasons attributed to this decline include governmental anti-corruption initiatives and a general economic slowdown. Rupert Hoogewef, founder and chief researcher of the Hurun Report, believes that this signals something very important: the maturity of the Chinese luxury market.

He went on to say: “The Chinese rich are no longer spending lavishly as they did in previous years. They are becoming more rational and mature, and care more about their own styles. They are now starting to appreciate the culture and craftsmanship behind their purchases.”

As an example, the article cited Rolls-Royce Motor Car Ltd as confirming that Chinese were the largest consumers of Rolls-Royce automobiles in 2013.

Other statistics of note include a higher number (31 per cent) of high net worth individuals who were confident about the Chinese economy as compared with only 25 per cent in 2012. Similarly, not confident HNWIs were 10 per cent in 2012 and fell to only 3.3 per cent in 2013.

The Hurun Research Insitute also reported that the emigration of ultra high net worth individuals was on the rise—an important topic discussed in the conferences that I attended in Shanghai and Hong Kong this week.

The most popular places of emigration by the Chinese UHNW were (in order) : US, Europe, Canada, Australia, Singapore and Hong Kong.