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The spending of China's rich
Publication Date : 17-12-2012
Most money goes on leather goods and automobiles, says new report
Many people assume the Chinese rich own gigantic villas, keep a horse or two and collect luxury watches or art but a new survey shows their favourite purchase trends to be leather goods and automobiles.
According to the latest report by Robb and Ipsos, a Paris-based research company, the top two products accounted for about 20 per cent of Chinese millionaires' total consumption over the past year.
People surveyed in the report spent an average of 1.55 million yuan (US$250,000) on high-end and fine-living items in the last 12 months, of which leather goods cost the most, making up to 30 per cent of their total expenditure, followed by autos, which accounted for about 20 per cent of all their purchases. A total of 16 per cent was spent on wristwatches.
The majority of individuals own more than two watches, with Patek Philippe being the most favoured brand. Bracelets/anklets and watches were the most popular types of jewellry purchased in the past year, said the report, 2012 Best of the Best - Luxury Lifestyle and Trends in China 2012, a luxury tracking and research paper into interpreting the content and pattern of China's luxury lifestyles.
In addition, 76 per cent of respondents own two cars or more. Ferrari is the most popular brand. When it comes to fashion, European brands, including Hermes, Chanel and LV, are the most favourite.
"Design was the main driving force behind the purchase of luxury goods. This was closely followed by product quality and brand image. Female customers showed a strong preference for product image and design, while males valued features and services more," according to the study results.
Additionally, the country's wealthy men maintained a robust investment in wine with 72 per cent of the respondents having a wine collection at home.
The World Luxury Association said during the 2012 Golden Week holiday, which was from September 30 to October 7, Chinese people buying luxury goods abroad spent about 3.85 billion euros (US$5 billion), a year-on-year jump of 14 per cent. The association predicts the luxury goods market in China will continue to sustain its rapid development over the next decade.
The extravagant spending follows a surge in the number of millionaires in the country not long after a period of poverty in which many went hungry.
According to the Hurun Report, a magazine best known for its China Rich List, a ranking of the wealthiest individuals in China, there were 1.02 million millionaires (with assets worth more than 10 million yuan) in China by the end of 2011, up by 60,000 individuals, or 6 per cent, compared with one year earlier. Within this figure exists a further elite group of 63,500 super rich individuals (with assets worth more than 100 million yuan).
The survey said wealth accumulation in China is still growing. The number of high net worth people in China doubled from 2008 to 2011 and is expected to double again by 2015.
According to the Ipsos and Robb report, leisure activities such as travel and participation in charitable activities are emerging as part of new lifestyles. Interviewees travel on average four times a year and 90 per cent have had at least one trip overseas in the past year.
On average, those interviewed made four leisure trips in the past year. As many as 91 per cent travelled outside China for leisure. Many enjoy participating in various leisure activities, including golfing and horseriding.
According to the report, more than half of those quizzed intend to purchase luxury products in the coming year. Sports utility vehicles or station wagons are the most preferred type of car being considered for purchase.
Nearly 70 per cent of respondents had an optimistic view toward the national property policy and indicated their property purchase intentions will not be influenced by it. About half of them considering buying overseas property in the upcoming year, mainly for the sake of their children's education.
"We are seeing an increase in spending by millionaires on their children's education, with a clear preference toward sending their children abroad to study. This is accompanied by the rise of emigration out of China and investment in overseas real estate," said the Hurun Report.
Currently, approximately one-third of respondents make personal financial investments. Stocks in Chinese companies, insurance, funds and property are popular investment choices.
Domestic banks are currently preferred for private banking. China Merchants Bank is the most popular bank, with others fairly evenly divided.
"We found the need to manage wealth through private banking and investment was increasingly prominent, while domestic banks gradually replaced foreign banks and became the first choice for wealthy people's private banking," said the study.
Respondents turn to magazines and the Internet for sourcing information to help with purchase decisions.
"The Chinese consumers' concept of luxury goods consumption is maturing and becoming more personalised. The report revealed that young affluent consumers chose luxury goods because of product quality and their role in enhancing personal image. Female consumers in particular were more able to perceive the role of fine goods and how they increase personal enjoyment," said the study.
The survey was jointly conducted by Ipsos and Trends Group's Robb Report. A total of 206 readers of the Robb Report with an average age of about 40 and average individual current assets of 4.2 million yuan were interviewed.
Interviewees were from major Chinese cities during the period from June 2012 to August 2012.
*US$1=6.23 yuan/0.77 euro