Shares in China’s Chow Tai Fook were ‘hammered’ last week according to Reuters (Photo: Bloomberg)
It’s all doom and gloom for China’s economy if this week’s media reports are to be believed. ‘Chinese Luxury Appetite Wanes’ declared the Wall Street Journal, ‘China Auto Sales Growth Eases Further as Economy Slows’ echoed Reuters, ‘Chinas Once Hot Economy is Turning Cold’ cried the New York Times. Burberry’s overall first quarter revenue fell short of expectations, a slowdown attributed specifically to China by the media.
Sales of everything from gold watches to leather handbags are declining according to WSJ, as China’s economy slows and governments crack down on corruption, which often takes the form of pricey gifts. The downturn deals a blow to the world’s luxury-brand companies, who have so far considered the Chinese market some kind of giant economic cushion to malaise experienced in the U.S. and European markets.
Whether or not this will cause the catastrophic chaos some of this week’s headlines have implied, only time will tell. But for the moment, a pessimistic flu seems to have taken hold of the media, when it comes reporting on the promise of luxury in China. Below we bring you some of the key words and numbers from the latest round of economic concerns.
“ A nationwide real estate downturn, stalling exports and declining consumer confidence have produced what a Chinese cabinet adviser characterised as a “sharp slowdown in the economy.” ”
China’s economy was 8.1 percent larger in the first quarter of 2012 than a year earlier, but virtually all of that growth took place in 2011.
“ China’s voracious appetite for luxury goods is waning as wealthy buyers succumb to nervousness about the country’s slowing economy. ”
The Savigny Luxury Index tumbled 5% as China announced a slowdown in its factory output for the month of May, on the same day Graff pulled its Hong Kong IPO citing treacherous market conditions
“ “After a phenomenal year last year, there’s been a bit of a slowdown in mainland China. Sales are still increasing, but not at the same rate as 2011” ”
Bernard Fornas, CEO, Cartier’
Wall Street Journal
China’s automobile sales growth lost further momentum as the country’s slowing economy sapped consumer sentiment.
Overall sales, including those of passenger cars and commercial vehicles, grew 2.9 percent in the first half from a year earlier to 9.6 million vehicles.
“ "Sales growth for high-end watches has slowed to single digits in recent months. Sales of mid- to low-end watches are still growing double digits ”
Tan Li, VP Hengdeli Holdings’
Burberry’s overall first quarter revenue increased by 11%, just short of the 13% gain expected by Investors.
The high-end retailer said revenue from China fell to a growth rate in the “mid-teens” from about 20 percent in the second half of 2011.
“ “The most important context for looking at this data is that the boom years are over. The days of 20 percent growth in autos or luxury goods – that’s mostly over.” ”
Andy Rothman, CLSA Research’
Not everyone is ready to join the pessimism party just yet. In what was, perhaps, a much-needed sojourn back to reality, Forbes commentator Jack Perkowski made the point that “nine percent sales growth of anything these days is great.” In light of the ho-hum response to news that China’s vehicle makers sold 1.58 million cars, trucks and buses in June, a 9 percent increase from June of 2011 (Forbes).
“Any way you look at it, these are strong numbers in any economy,” he continued, before reminding the general public that a slowdown in a company’s China sales is not necessarily due to China’s overall economy. “When listening to media reports and commentary about China and its economy, keep in mind that China is a very competitive market,” he urged readers. “Yesterday’s hot product may go cold today.”
To further investigate the impact of China’s economy on Luxury Society, we invite your to explore the related materials as follows: