New Delhi: China’s once-booming luxury market is facing a sharp contraction as international brands close stores across major cities while wealthy consumers cut down their spending, a new report has said.
The report from Uganda-based Nile Post said international brands such as Louis Vuitton, Gucci, Balenciaga, and Rolex are closing stores in China citing falling demand amid a collapsing middle class and property market crisis.
The report said government policies are failing to stabilise domestic demand when luxury boutiques that once thrived on conspicuous consumption now stand empty.
The publication cited surveys as saying that high-net-worth individuals plan to cut luxury purchases by 10 per cent this year, due to tighter tax oversight, volatile financial markets, and the long-term weakness of the real estate sector.
“The upper middle class, burdened by mortgages, car loans, and education expenses, has been forced to liquidate luxury assets in the second-hand market. Yet even this market has collapsed, with Rolex watches and Louis Vuitton handbags losing thousands in value,” the report noted.
The middle class suffers from rising unemployment, shrinking savings, and mounting debt as malls and shopping districts have become “ghost towns”.
Coffee shops, restaurants, and even fresh food markets continue to increasingly shut down as the middle class struggles to maintain even modest lifestyles.
Falling property values have eroded consumer confidence, leaving families with heavy debt burdens and little disposable income.
The Chinese Communist Party relied on subsidies for credit card repayments to address the crisis rather than expanding social safety nets. Such a short-term fix to create an illusion of consumption will only prolong the malaise, the publication noted.
When luxury brands remain resilient in Europe, the US and Japan, the downturn in China proves that there is a structural problem in Chinese economy.
China’s economic slowdown is spreading across industries, from premium liquor and tobacco to everyday retail and dining, the report noted.
(IANS)
