Luxury consumer behaviour in Mainland China: What exists behind the facade of new wealth?

By Pierre Xiao LU

China recently became the world’s second largest market for luxury goods with an annual increase of more than 30% in 2010, even surpassing Japan. Further estimates predict that China will become the largest upscale product and consumer goods market in the world. How does a country with an average GDP per capita of $3,800 USD, and classified behind 105 in the world ranking possess such a strong propensity for consuming luxury goods and products? Specifically, how does one make sense of Mainland Chinese luxury buyers and their respective consumer behaviour? This article answers these strategic questions for foreign companies and marketers who are interested in the luxury industry in China, and for those who want to develop a greater understanding of one of the world’s largest market and its 1.3 billion consumers.

At the core of this paper is an explanation of Mainland China’s 21st century value system that can only have been shaped from the country’s rich history. Answering how China has become the buoyant socialist state economy it is today, is to shed light onto the country’s various economic, social, cultural and psychological histories.

The history of luxury consumption in China is one of the country’s oldest. It remains deeply rooted into China’s cultural and sociological landscape and has subsequently influenced other Asian countries such as Japan, Korea, Vietnam, Thailand, Malaysia and Singapore. The contemporary Chinese antique market and auction houses offer a telling explanation of how luxury is consumed in China. During the economic downtown, collections of Chinese antiquities were sold at Christie’s auction house for far more than their estimated value. In 2009, a 12th-century B.C. bronze vessel from the Western Zhou Dynasty sold for over 14 times its estimated value. These antique collectors are, in large part, Chinese or Asian. Collecting an expensive, storied antique is viewed in a similar vein to purchasing a luxury good. To own an artefact at home was tantamount in grandeur to that displayed by museums around the world that also housed ancient Chinese art collections. In sharp contrast, during China’s Cultural Revolution from 1966 to 1976, tradition and Chinese cultural heritage was viewed negatively as something boring, worthless, and divisive. History and heritage were destroyed in favour of new equalising ideology.

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The views expressed in this article are those of the authors and do not necessarily reflect the views or policies of The World Financial Review.