• Industry: Food, Drink & Consumer Goods
  • Type: Business and industry issue
  • Date: 6/12/2013

The Power of China 

The Power of China
The world’s pivotal economy is still spending billions on luxury goods. The next challenge is to develop its own luxury brands that the world wants to buy. We debunk four myths to find out how.

Charles de Gaulle famously described China as “a big country, inhabited by many Chinese”. Sad to say, the West’s understanding of this Asian superpower has not advanced as rapidly as the country’s economy. The West’s reaction has varied between demonization and goggle-eyed gee-whizzery. A similar confusion surrounds the state of the country’s luxury goods market. One way to understand what is really happening in this sector is to explore four of the most common misconceptions.

Myth 1: The anti-corruption drive has brought China’s luxury goods market to a standstill

Not according to Burberry, which is opening three outlets in Shanghai after double-digit sales growth in its China stores. Not according to L’Oréal, which has doubled sales every four years in China. The group’s bestselling line, Lancôme, is available in 170 Chinese cities and the group’s Chairman and CEO Jean-Paul Agon says: “The slowdown in China is very limited – the penetration of luxury is just beginning.”


The forces driving the Chinese luxury boom haven’t really changed. Luxury magazine Hurun estimates that in 2012, 7,500 Chinese individuals were worth RMB 1bn (US$150m) or more, compared to 3,500 in 2011. For the first time, the number of Chinese worth more than RMB 10m (US$1.6m) topped one million. These individuals still want to clarify their status or pamper themselves by owning products with the requisite craftsmanship, heritage, prestige – and price tag.

Myth 2: The Chinese like to flaunt their wealth

The cliché that Chinese millionaires always buy the most expensive example of whatever product they are interested in no longer applies. Qian says: “Ten years ago, people liked to show off how rich they are. That is not very trendy in China at the moment.” The public mood has changed – hence the government’s advice to officials to cut down on banquets, travel and entertainment – so wealthy Chinese have found new ways to underline their status. The shift from flashy exteriors to plush interiors in Rolls Royce cars is a case in point. For many, status means moving away from the designer logos usually lusted after by the newly rich. This change in taste has been accelerated by hours of online research. The average age of a Chinese luxury consumer is 39 – younger than in the West – and 40% of those surveyed by KPMG said they would consider purchasing online. Qian says: “In China, fashion bloggers have become celebrities who can make a product.” Han Huo Huo is China’s most famous fashion blogger, with a million followers on Weibo, the micro-blogging site that is a kind of hybrid of Facebook and Twitter. Sun Yafei, CEO of Fifth Avenue Luxury Network (, says Beijing is leading this shift in taste: “The well known brands are popular with white collar workers from cities such as Chengdu and Chongqing. In Beijing, consumers are becoming more individualistic and looking for unique products.” The quest for something unique has, Qian says, led many wealthy Chinese to look for experiences other people’s money cannot buy – exclusive hotels or spas, once-in-a-lifetime events or lavish holidays. One US travel consultancy recently rented a mansion in the Hamptons, the exclusive enclave on Long Island, for 21 Chinese who wanted to experience the lifestyles of famous industrialists from the age of John D. Rockefeller. China’s rich may be consuming less conspicuously but they are still consuming. By 2015, some analysts predict, they will account for 25% of the world’s luxury goods market.

Myth 3: China can’t make luxury goods

As Hung Huang, the actress, publisher and businesswoman whose Beijing boutique Brand New China (BNC) only stocks homegrown wares, has pointed out: “The Chinese do produce luxury goods like tea, baijiu [a Chinese spirit, like sake, which can sell for US$10,000 a bottle] and some health products.” And if you have US$270,000 to spend on a bespoke watch, you can place an order with the Tianjin Sea-Gull Watch Group. These timepieces are so technically complex that the company only makes two a year. China has never lacked craft. Ancient Chinese lacquer-ware and ceramics once inspired the West. In 1602, Ming dynasty blue and white porcelain was bought by the kings of England and France. Such traditions fell victim to China’s turbulent history but have been revived in the past 20 years. Investments by Hermès (which backs Shang Xia), LVMH (which owns 55% of Wenjun Distillery), Kering (majority owner of Qeelin) and Richemont (owner of Shanghai Tang since 2001) show that many luxury goods giants are spending millions in the belief that China can, if you will, deliver the luxury goods.

Myth 4: China will never have a global luxury brand

Never is a long time, but Qian does not underestimate the challenge facing the country’s luxury goods industry. “We do not have a luxury brand you can place alongside Hermès or Chanel. The key values of a luxury brand include tradition and prestige. We don’t have a brand with a 200-year history that has achieved global recognition.” China has no shortage of emerging luxury brands but Qian says: “People are more familiar with made in China than designed in China so the transformation could take years to accomplish.” Many wealthy Chinese equate luxury with European brands but Dennis Chan, chairman of Qeelin, says: “We expect Chinese consumers to develop a growing awareness of their roots and, in time, to seek brands that express their own values.” Until that happens, many Chinese designers and companies will give their products a Western flavor as they strive to compete. Designer Mary Ching, known as the Louboutin of Shanghai, spent years in the UK and tries to marry Chinese decadence and British eccentricity in her clothes. Having a presence in London, New York and Paris (as Shang Xia plans to do) will help Chinese brands impress their own consumers.

The other way to compete with iconic global brands is to buy them, as Trinity has done with Gieves & Hawkes, Kent & Curwen and Cerrutti. This strategy has also been adopted by Shandong Heavy Industry (which owns Italian yacht maker Ferretti), YGM (owner of Acquascutum) and Heidan Holdings (which owns Swiss watchmaker Corum). Debnam expects Chinese companies to make more acquisitions: “They have the financial resources and these deals are a good way of acquiring expertise and market presence.” Yet, like Chan, he is confident China will develop global luxury brands too, possibly in hotels, spas and apparel: “The Chinese are fiercely patriotic and the right fashion designer, maybe one who’s learned their trade in the West, could do fabulously. That could happen in the next three years.”

Chinese luxury brands poised to go global

As the country aspires to move up the value chain, these six companies want to become as famous and prestigious as Prada.


Shang Xia

Shang Xia (Mandarin for ‘up down’) sells exquisitely made furniture, decorative objects and garments. Distanced from fashion and inspired by Chinese tradition and craftsmanship, these items range from yak-hair felt coats at US$1,900 to goldwoven porcelain teapots that cost US$45,000. The company was founded by Chinese designer Jiang Qiong Er in 2008 but is owned and supported by Hermès International. It has stores in Shanghai and Beijing, and will be opening a Paris branch later this year. Hermès Chief Executive Patrick Thomas has said he plans to invest tens of millions of dollars in the brand, and expects to see a profi t in three to fi ve years.

Shanghai Tang

The company started in 1994 as a custom-tailoring business but soon moved into ready-made garments. In 2006, the brand was bought by Swiss fi rm Richemont, owners of Cartier, Chloé and Mont Blanc and one of the largest luxury goods companies in the world. Of Shanghai Tang’s 45 stores, 30 are in mainland China and the company’s CEO, Raphael Le Masne de Chermont, says 80% of the company’s future growth will be here. Its huge new fl agship store – the Shanghai Tang mansion (pictured below) – opened last year in Hong Kong’s Duddell Street. The company has also branched out into homewares and accessories, with which it aims to embody “the modern Chinese aesthetic”, bringing Chinese culture and experiences to the world and making the most of surging home-grown pride.


Formed by Chinese designer Dennis Chan and French entrepreneur Guillaume Brochard – Qeelin gives traditional Chinese symbols a contemporary twist and, with the aid of a little French craftsmanship, turns them into luxury jewelry. The brand launched in 2004 with a boutique in Paris, a locale designed to impress the elite Chinese shopper. Qeelin now has 18 boutique outlets, with seven in China which accounts for half of its sales revenue (around US$38.5m). A majority stake in the company was recently acquired by Kering, whose CEO, Francois-Henri Pinault, believes the Qeelin brand has great potential and will develop rapidly.


Sheme makes high-end footwear, often embellished with hand-embroidery and Swarovski crystals. Founded in 1986 by Linda Liu, who began by selling shoes from her bicycle in Sichuan province, the company exports US$50m-worth of shoes a year. Liu is building a high-end brand, melding European know-how with Chinese culture. Sheme’s chief designer is Italian Leopoldo Giordano (previously at Chloé, Marc Jacobs and Kenzo). Much emphasis is placed on quality raw materials – Italian leather and Chinese silk – and most shoes involve handcrafting. Sheme now has four stores in China – and aims to open outlets in Hong Kong, London, Paris and Milan.

Chow Tai Fook

The Hong Kong company didn’t open a store in mainland China until 1998, but by 2010 it had 1,000 in Beijing alone. Most of its products are traditional mid-range jewelry, but it has a VIP program that creates unique pieces for high-end customers, who it flies to special events such as Paris Fashion Week. These VIPs spend an average of US$128,000 a year and sales to them account for 30% of revenue. The company is valued at US$14bn on the Hong Kong stock exchange and the founder’s Harvard-educated grandson, Adrian Cheng, recently joined to modernize the company. Last year Chow Tai Fook opened 269 stores, reaching out to new cities across the country.

Peninsula Hotels

The first Peninsula hotel opened in 1928 in Hong Kong and the name represents grandeur and cutting-edge design. Its flagship Hong Kong Peninsula pays homage to the ambience of 1930s Shanghai but with state-of-the art technology in each room – including an iPad to control the room settings – and an upscale shopping arcade. The family-owned Hongkong and Shanghai Hotels group focuses on super-luxury for discerning high-level travelers – it owns eight other hotels in Asia and the US – and has an annual turnover of US$3bn. Peninsula wants to open hotels in London, Paris and India.


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