Can China shake off its image as a low cost, cheap goods producer and compete in the world as a leading producer of top-class goods?
Some compelling trends indicate China is poised for an image makeover.
China is in a cycle where living standards are improving, more wealth are displayed and more people want higher wages to either keep up or have a certain lifestyle. China’s hungry creative population is eager to be innovators and arbiters of taste. Most importantly, those who know China know if the government is behind it, it can happen.
Three promising signs that’s driving ‘Made in China’ toward luxury and chic:
1. Rising Wages
With rising wages, companies looking for low cost producers will have to look elsewhere, like Vietnam and India. Some think China will lose its export competitiveness with a higher cost labor force, but it appears the government is all in favor of this trend.
“We think the government is supportive of wage increases to improve wealth equality and stimulate consumption. In fact, the government had, in its work report, revealed its intention to improve labor compensation,” said Credit Suisse economist Dong Tao. “The purpose of the policy is to strengthen the consumption power of the middle-income group,” reasons Tao. “This fits in with the larger strategy of transforming China’s economic structure from being export- and investment-led to being domestic consumption-led.”
UBS economist Wang Tao also agrees that “gradual wage increase will help China move to a more consumption-based economic growth model.” It may be China’s own appetite for luxury goods that will drive the country’s growth in high-end manufacturing.
2. Flourishing High-End Factory Sector
Another reality is the existence of a flourishing high-end factory sector, albeit very small, that produces top-quality goods, reports The New York Times. “Luxury manufacturing in China is a new trend so there will not be many factories,” said Hana Ben-Shabat, consumer goods specialist with management consultancy A.T. Kearney.
Designer Rafe Totengco of Rafe New York, a label popular among the Hollywood set, was “blown away” when he visited factories in southern China. Totengco found “tidy, Chinese-owned factories with neat, uniformed local workers and some Italian employees. The equipment tended to be cutting edge and the products were excellent quality with attention to detail.” Two of his collections are entirely made in China.
While prices may not be cheap in these higher-end factories, Chinese factories meet deadlines and China has a “sophisticated supply chain infrastructure,” according to Fiona Kotur-Marin, a Hong Kong-based designer who is also a silent partner in Tory Burch. Also, the best workshops are selective, they will not just work with anyone.
China produces more luxury goods than acknowledged as many luxury brands are reluctant to disclose their product sourcing and manufacturing due to the stigma still attached to the ‘Made in China’ label. The World Luxury Association estimated that 60 percent of all luxury goods were made in China in 2009.
3. More Homegrown Brands Confident and Proud of Craftmanship
Chinese consumers generally favor foreign luxury brands due to perception of better product and design, but more importantly, brand name recognition. They never really had a local choice — a Chinese brand that’s recognized internationally that can confer status.
We are seeing rising confidence among local Chinese designers in their design sensibility and ability to produce excellent craftsmanship. Designers are emerging from the shadow of the West’s definition of luxury and defining luxury on their own terms and setting the style in fashion, sometimes with a mix of Eastern and Western culture influences.
Shanghai Tang is probably one of the best examples of a Chinese luxury brands that became an international brand. Its clothing offers contemporary Chinese chic that blends the East and West. “At a recent fashion show in the city, Shanghai Tang launched the latest designs from its haute couture line, known as the Imperial Tailoring collection. By blending modern Chinese materials (fine silk, Mongolian cashmere, jade) and traditional Shanghainese tailoring skills, it is a collection showcasing top Chinese craftsmanship,” reports the Shanghai Daily.
With a clear, consistent, and clever brand positioning, Shanghai Tang is recognized as an international luxury brand without any issue that all its products are made by Chinese.
Shanghai designer Jiang Qiong’er, the brainchild behind Hermès’ Chinese Brand Shang Xia, indicated that everything about Shang Xia is ‘made in China’ — “from design to materials, from manufacturing to marketing, remains local. In short, it is a Chinese brand developed in China by a Chinese team, produced in China based on traditional Chinese craftsmanship.”
Things are changing these days, more and more homegrown brands are proudly announcing their top “made in China” quality.
Ultimately, it’s the intangible, the image crafted around a brand, that is often the key to success for a luxury brand. No one does it better than European brands, particularly Italy — the long held perception that quality products are handcrafted in Italy.
The Chinese hope to change this perception worldwide.
photo credit: shanghai tang