Diamonds are Forever… in China, at least

Isaac Mostovicz writes that the Chinese luxury market goes from strength to strength, even as demand in the Eurozone languishes...

In the wake of diamond producer De Beers’ recent profits, an article in Finance Asia states that even a recession will not impact the growth of the global luxury market.

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The research company CLSA predicts that whilst the rest of the world is tightening its purse strings, the global luxury market will increase by 8% during 2012, largely driven by the appetite of the Chinese for luxury items – where it is predicted to grow by 25% by the end of the year.

 

“We think that the demand for luxury goods in China and Asia is driven by the rise of the middle class, and that is a structural story,” Aaron Fischer, Asia-Pacific head of consumer and gaming research at CLSA, told FinanceAsia in a telephone interview last week.

 

Fischer added that even if the economic slowdown were to impact the Chinese market directly, this would have no impact on their consumption of luxury goods.

 

Fischer’s team carried out this analysis based on the Japanese market, which in the past experienced a very similar explosion of luxury goods consumption. However, it acknowledged that the Chinese market has far more room for growth due to the increased number of outbound Chinese tourists travelling to luxury European hotspots like Paris, London and Milan.

 

Hong Kong has attracted multiple IPOs from Prada and Samsonite amongst other international luxury brands, all attracted by the successful Chinese growth story. But not all Chinese are welcoming the increased presence of luxury brands in their country, as it does highlight the growing income gap between rich and poor. Reportedly, Beijing has put in place controls around luxury advertising, asking companies to remove words such as “luxury,” or royal from their marketing materials.

 

Yet there’s no doubt that China is still one of the strongest markets in terms of demand for luxury goods – with Latin America, the Middle East and other emerging markets following not far behind.

 

“I don’t want to rule out Latin America and the Middle East. They are attractive markets as well,” Fischer said. “And over time there’ll be more opportunity in India and Indonesia, and some other Southeast Asian countries like Vietnam.”

 

 

 

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