From Chinese Press

The dichotomy of luxury market

(China Daily)
Updated: 2011-06-16 07:54

The China Council for the Promotion of International Trade and the World Luxury Association (WLA) have jointly announced the formal establishment of China Luxury Trade Commission, the first specialized platform for luxury trade in the country, says an article in Youth Times. Excerpts:

The latest WLA report says the total consumption of luxury goods in China last year was $10.7 billion, or 25 percent of the world total. Also, China is expected to surpass Japan as the top luxury goods consuming country in 2012.

But while foreign luxury goods companies are making a beeline for China, domestic companies have kept away from this sector. This despite the fact that China is the world's second largest economy and has one-fifth of its population.

It's not that Chinese companies don't want to make luxury producers. It's only that they are too modest to become luxury brands producers.

This attitude of domestic companies toward luxury products has restricted China to the low end of the global value chain.

According to WLA figures, raw materials and processing cost of luxury goods make up only 11 percent of the price, while brand added value accounts for 55 percent. And brand added value is exactly what domestic companies lack.

Low added value results in low profits and salaries, affects economic transformation and has made the country dependent on export-oriented economic growth for long.

Besides, it has forced a great amount of wealth to flow out of the country and led to excess liquidity at home.

(China Daily 06/16/2011 page9)