Millionaires mushrooming in China

Baltimore News.Net
Saturday 20th June, 2009

Despite the global financial crisis, the number of high net-worth individuals on the Chinese mainland has hit a record high.

And they're continuing to spend, according to the Hurun 2009 Wealth Report. The study found 825,000 mainland Chinese, or one in 1,700, with a personal wealth of at least $1 million USD).
And now the rich are more likely to be found in second- and third-tier mainland cities. Rupert Hoogewerf, founder and publisher of the Hurun Report, a leading luxury business magazine in China, and author of the annual Hurun China Rich List, explains what this means for brands looking to tap the mainland's high-end consumers.
How are China's wealthy holding up during the credit crunch?

Relatively speaking, China has avoided the worst of the credit crunch. Our data shows that 82 per cent of China's richest have not made any lifestyle changes since the financial crisis hit. The underlying reason is that their confidence remains high. They believe that in six months or a year, it will have blown over completely, and China will be back on a track of high growth.

How would you profile China's big spenders?

The average mainland Chinese millionaire is 39 years old. The average mainlander with $10 million is 43, and the average mainlander with $100 million is 49. This makes China's richest 10 to 15 years younger than their Western counterparts. They have a special affinity for international luxury brands, especially European brands. If a Chinese person has built a successful business, the first thing they reward themselves with is a luxury watch, then a luxury car; after that comes all the rest.

Where do the second- and third-tier cities rank in terms of consumer spending power?

As Beijing, Shanghai and Shenzhen are becoming inundated with luxury brands, there has been an explosion of growth in wannabe cities. The latest Hurun Wealth Report highlights the increased importance of second- and third-tier cities for brands looking to tap China's high-end consumers. Leading the pack are cities like Hangzhou, Chengdu, Chongqing, Shenyang, Qingdao and Xiamen.

What does this mean for brands targeting China?

Luxury brands looking to break into the China market need to have a good partner. If you try coming in on your own in the retail industry, it is very hard to make things happen. You also need to be sure of your brand positioning and pricing; many brands arriving in China sell more expensively than back home.

Does Hong Kong make a good partner for the mainland?

Hong Kong enjoys a huge advantage. With a generation or more of luxury brand experience, local dealers in Hong Kong have accumulated expertise on the subject, and are best placed to develop brand strategies for the mainland. Hong Kong is also intensively competitive for luxury products, so brands tend to cut their teeth there before coming into the mainland.

As the mainland's spending power continues to rise, where do you see Hong Kong's role in this?

Hong Kong has always been a shopping Mecca. It has a more favourable tax rate, so many luxury products are cheaper in Hong Kong than on the mainland. So long as the tax remains favourable, places like the Landmark and other upmarket shopping malls will continue to attract luxury mainland consumers in their hoards.

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