China Luxury Takes A Hit With New Government Bans

on July 16 2012 | in Lifestyle | by | with No Comments

Mao Zedong, when he founded the People’s Republic of China, called for party members to “remain modest and prudent” and ascribe to a life of “hard work and plain living.” As the luxury market in China grows, this prescription is becoming very difficult to follow for most in office. Now, a series of ban on the purchasing of luxury goods by government officials is being enacted to help the government regain a cleaner image.

As reported by China Central Television, Chinese officials spent 408.5 billion yuan ($64 billion) on vehicular expenses, 200 billion yuan ($31 billion) on dining, and 300 billion ($47 billion) on traveling abroad.

The new restrictions will go into effect on October 1, just in time for the week-long celebration of the founding of PRC. It’s not surprising that these bans come as the country experiences economic slow-down.

“Some local governments cannot even pay salaries so the government wants to show that it’s leading by example. The primary consideration is that right now the Chinese economic situation looks terrible,” said Minxin Pei, a professor of politics and government at Claremont McKenna College in California.

The Wenzhou city Commission for Discipline Inspection said that work-related meal expenditures for officials are capped at 60 yuan each, and that luxuries like abalone, shark fin, and sea cucumber are all off limits. Wenzhou also sold 215 vehicles in its official car fleet last month. Currently Wenzhou is, perhaps, the most prominent local city to fight against conspicuous consumption.

In addition to the three big arenas of cars, dining, and travel, luxury clothing and accessories will also feel the repercussions of the new governmental policies as gift giving will also be impacted.

Some brands, like Burberry, are already experiencing declining quarterly sales. While the brand grew 11 percent this past quarter, it was projected to hit 13 percent. The company attributed the lower sales to a slowdown in gift-giving.  As these government policies take effect, there is still the question of how they will further impact industry.

Retail consultant Corbett Wall said, “A lot of goods sold in luxury stores are meant for gifting from officials to other officials or to business. Whenever there’s a big government meeting, those stores in Beijing get busy.”

Chinese citizens recently were in an uproar at such an occasion, when government officials at the country’s annual legislative meetings were decked out with gold plated watches and expensive handbags.

Hu Xijin, editor of the Global Times wrote, “If ‘three publics’ spending can be successfully controlled, it could be a turning point in the building of clean government in China and an inspiration to the entirety of Chinese society.”

photo credit: ik’s world trip

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