In China, luxury goods are all the rage – so much so that the Beijing Municipal government decided in April to ban the word “luxury” from billboard advertisements. Announced in advance of this year’s National People’s Congress, this new rule was intended to promote social cohesion and discourage “spiritual emptiness.” But Beijing’s vocabulary experiment had little impact on top luxury retailers; their brands are already household names in much of China and demand for luxury goods among China’s middle and upper classes is on the rise.
Whether purchased as gifts or for individual consumption, luxury goods are significant status symbols in China. Possession of a car, an iPad, or the newest Adidas sportswear implies an impressive degree of financial success. A Rolex watch or bottle of Guizhou Maotai baijiu (distilled sorghum alcohol) indicates you are among those who “got rich first,” as Deng so famously predicted, and are now situated among the emerging elite in China’s increasingly stratified society.
And as incomes rise and Chinese consumers continue to display their new-found wealth, expenditures on luxury goods are expected to increase. According to a statement made by Commerce Minister Chen Deming in March, China may surpass Japan as the world’s largest luxury goods consumer by 2015. The dozens of BMWs, Mercedes, and Maseratis parked outside of China’s high-end karaoke establishments seem to confirm this trend, as do the masses of Chinese shoppers juggling Louis Vuitton bags, Haagen-Dazs ice cream cups, and Starbucks lattes while strolling around Shanghai’s Xintiandi.
Chinese luxury shopping sprees have even become a sort of global phenomenon. Tales are told of Chanel buy-outs in Paris or of entire silver shops being cleared out in Mexico City. Chinese tourists clearly bring their shopping habits with them when they go abroad. As Evan Osnos illustrates in his New Yorker article “The Grand Tour,” while Chinese tourists opt for budget accommodations and inexpensive food when traveling, shopping remains a major priority, even rivaling trips to tourist destinations. And when Chinese tourists shop, they usually shop big — a group of Chinese tourists can mean the difference between a good and bad year for certain luxury retailers.
In light of their increasing numbers and tendency to spend, tourism ministries in Latin America look fondly upon Chinese tourists. In fact, one of the top priorities of the Mexican Embassy in Beijing is to promote Chinese tourism. Mexico recently improved tourist visa procedures and is arranging direct flights from Shanghai to Mexico City. As a result of these efforts, and tourism’s increasing popularity in China, Chinese tourism to Mexico jumped 67% from 2009 to 2010. Brazil boosted its share of Chinese vacationers by signing a 2005 memorandum of understanding with China on bilateral tourism cooperation. In some cases, the Chinese government itself has promoted tourism to Latin America. China encouraged its citizens to travel to Costa Rica after the Central American country established diplomatic ties with Beijing in 2007.
As generations of middle class, image-conscious only children come of age in China, travel and luxury spending are unlikely to decline in popularity. But a decline in China’s economic growth (as a result of inflation, debt concerns, unemployment, or a number of other factors) or rising exchange rates in popular tourist destinations (think Brazil) could impact the ability of middle class Chinese to travel abroad and/or to purchase luxury goods. It would be best for Latin American countries to take advantage of Chinese interest in the region’s history, culture, and valuable handicrafts while Gucci wallets are still full.