Sotheby’s and Christie’s Hong Kong auction houses are enjoying roaring sales in art, expensive jewelry and fine wines. Luxury companies that pander to the super-wealthy, such as yacht and custom-made luxury car makers, are also experiencing increases in sales in China.
The New York Times notes that China's rich are splashing the cash despite the recession:
In December 2008, when the credit squeeze set off by the collapse of Lehman Brothers was at its most severe, Christie’s raised $33.5 million at its jewelry sale in Hong Kong, more than at any of the other jewelry auctions it held elsewhere that season.
China’s wealthy have cash to burn, and want others to know it. For a wealthy Chinese buyer, a product's quality matters less than how much it cost.
As the Financial Post reports:
"In many parts of Asia, where it's absolutely new money, buying luxury is still about showing off," says Radha Chadha, author of The Cult of the Luxury Brand: Inside Asia's Love Affair with Luxury. "They may have put some of their shopping on hold because of the uncertain future, but when they do buy, especially in China where it's by and large new money, it's usually not about being discreet."
This attitude among China’s wealthy runs against the prevailing global mood, with struggling consumers are competitive pricing, budgeting their finances, and shopping for value.
Luxury brands, however, are experiencing an interesting situation in China, where their global reputation casts only a vague shadow. In lieu of the luxury shopping experience that exposes these breands elsewhere, Chinese buyers are using cost as a yardstick for measuring desirability. To stay competitive, luxury brands in China should actually be hiking prices -- the more outrageous, the better -- to prove they are the best.