The Economy Won’t Hold Back China’s Luxury Consumption
Neither, it appears, will the devalued yuan.
After the efforts of Chinese government’s “one-off devaluation”, the exchange rate of yuan against US Dollar reduced about 3.2 percent from 6.2 to 6.4 since October 2014. Although the total luxury consumption of Chinese people fell in 2014 by one percent to about $18 billion due to China’s economic slowdown, according to market research by Bain & Company, spending on luxury goods abroad is likely to maintain its upward trend this year.
Nan Geng, a 34-year-old associate researcher working in Beijing, has spent her last three days in New York traveling and shopping together with her family. They bought two laptops, a Coach handbag, and a few other electronic products from Macy’s and a nearby Apple Store.
“A devalued yuan is not nearly enough to deter the very strong urge of Chinese shoppers to buy luxury goods overseas,” Ting Zhou, director of The Fortune Character Institute, told The New York Times. The Fortune Character Institute is an organization based in Shanghai that specializes in lifestyle studies of the rich in China.
The Chinese Ministry of Commerce estimated that the price of luxury goods in China is 51% higher than in the United States, which is regarded as the main factor encouraging Chinese people to shop overseas.
A weaker yuan is likely to narrow the price differences between products sold overseas and Mainland China but is not going to cut down the overall luxury consumption occurred spending overseas, Zhou pointed out.
Chinese people’s luxury consumption overseas has increased five percent this year, according to a survey conducted by Fortune China in March. There is no proof that the depreciation of yuan has hit Chinese consumers’ spending overseas, for a small percentage reduction might not make a big difference, according to CNBC.
Inside the Bloomingdale’s at 1000 Third Avenue, every counter has an Asian assistant who speaks Mandarin. “At least a half of our clients are Chinese,” said Ampara Davis, a shopping guide of Chanel.
Fangzhou Yuan, a history student at Gettysburg College would buy four sets of Advanced Night Repair — Estée Lauder’s flagship product — every time he visited duty-free stores before his flight leaving New York. One was for his mother and others were gifts for his relatives.
Chinese customers typically spend $200 to $400 on average when purchasing skin care products, said Stephy Chen, a shopping guide for Estée Lauder. According to Anneka Mclean, a shop assistant at Sephora, Dior, Marc Jacobs and Yves Saint Laurent are the most popular makeup brands among Chinese tourists in New York because they are “more expensive and prestigious”.
“Some of our Asian clients just went little crazy and took as many as they can,” said Mclean.
Nan Geng said her Coach bag was about 250 dollars but she’s not sure. She didn’t look at the price tag at all when she was shopping, for she knew “products here would be a bargain in terms of their prices in China”.
Last year, more than 2 million Chinese people traveled to the U.S. purchasing $211 billion worth of American products and services, according to the U.S. Department of Commerce. The top three categories of products purchased by Chinese in the U.S. are bags, cosmetics and perfumes. China has remained the top buyer of luxury goods worldwide since 2012 and it is expected to maintain that status for at least five years from now.
