One of those hoping to show that the flow of sartorial capital not only goes from West to East, but also vice versa, is Haizhen Wang. Originally from Dalian in northeast China, he trained at Central Saint Martins in London, graduating in 2005. Wang then came to the attention of the fashion world last year after winning the Fashion Fringe Award for young designers and was mentored by Burberry’s chief creative officer, Christopher Bailey.

Like many of the emerging Chinese-born, Western-educated generation of designers, the influence of Wang’s home culture on his work is subtle. While his collection was inspired mainly by gothic architecture, Wang says his Chinese roots underlie everything he produces.

“Even if you can’t see any obvious Oriental influences, like dragons for example, across my pieces, the man who made this collection — me — is Chinese and that will always be there, even though I was trained in the West.”

Tom Ford, the designer and film director whose name is almost synonymous with luxury and style, says he is closely watching how Chinese consumers are maturing. Ford observes that — as in other emerging markets — China is moving away from the initial lust for designer logos that tends to characterise the newly rich. “Tastes become quite refined and equalized with the rest of the luxury consumer all over the world … I think that’s really starting to happen in China and it’s moving very quickly.”

See also China’s Street Fashion, an article profiling the Chinese street fashion brand, Eno, via CDT.

© Melissa M. Chan for China Digital Times (CDT), 2013. | Permalink | No comment | Add to del.icio.us
Post tags: fashion, fashion industry, luxury brands, luxury goods
Download Tools to Circumvent the Great Firewall

China’s upscale restaurants and hotels are feeling the pain as the government pulls back on public funding for fine dining amid efforts to project an image of increasing official austerity.

Upwards of 60% of restaurants have faced cancellations since the austerity push began, according a report released on Thursday by the China Cuisine Association (in Chinese), which surveyed 100 restaurants and hotels across the country to determine the economic impact of the government’s belt tightening.

One five-star hotel in Beijing saw roughly 10 million yuan ($1.6 million) in reservations cancelled, according to the report. Catering businesses in the northeast city of Tianjin have seen business drop by 30% this year compared to the same period last year, the report added, though it didn’t specify a time frame for the period.

In another article about the ongoing crackdown on corruption, The Wall Street Journal cites a Xinhua report on an official who was suspended for failing to observe the ban on official banquets:

Officials have suspended Zhou Shaoqiang, the manager of state-owned Zhuhai Financial Investment Holdings Co., for holding a luxury banquet last month despite a government ban on lavish government-sponsored events, according to a report Tuesday from the official Xinhua News Agency.

Luxury brands have also long raked profits from the pockets of corrupt officials, and have also been a cause for public outrage – last September, Yang Dacai, aka “Watch Brother,” was removed from his official post after netizens lambasted him for wearing designer watches whose price tags far outweighed his salary. On his blog at The New Yorker, Evan Osnos reports on the gains that luxury brands have seen in China, and the declining returns that watchmakers have seen since the anti-corruption campaign began:

Global luxury sales and epic Chinese political corruption have become so inextricably intertwined over the last decade that the recent kerfuffles in Chinese politics—the investigations and convictions and pledges of propriety—have been nothing but trouble for the privileged few. That became clear last fall, when political disorder in Beijing made it difficult to know which faction would end up on top, and one luxury-brand representative told the Journal that sales were down because “no one knows who to bribe.”

Some of the heaviest hearts are in the luxury-watch business. No industry has enjoyed such a warm embrace in China as the one that packs such enormous monetary value into a small, easily exchanged physical object. And, sure enough, the luxury watch business enjoyed a banner year in 2011, growing forty per cent. But then China’s anti-corruption campaign began, and by September, Bo Xilai was in handcuffs, and watch exports to China suffered a devastating blow—down 27.5 per cent compared to a year earlier, according to the Federation of the Swiss Watch Industry. China Daily quoted an industry consultant saying the anti-corruption drive “hurts the luxury watch business a lot.”

It’s not just watches. In 2009, the industry experts estimated that gifts to government officials made up nearly fifty per cent of all of China’s luxury sales.[...]

© josh rudolph for China Digital Times (CDT), 2013. | Permalink | 2 comments | Add to del.icio.us
Post tags: anti-corruption, chinese new year, corrupt officials, corruption, lunar new year, luxury brands, luxury goods, official conduct, Year of the Snake
Download Tools to Circumvent the Great Firewall

Companies such as Burberry Group Plc and LVMH which sell luxe clothing and accessories benefit from this gift-giving culture, and wealthy Chinese men’s penchant for designer ware.

But they are also at risk of big sales swings because men are less likely than women to splurge on discretionary purchases in times of economic uncertainty, CLSA’s research shows.

“Men are not prone to impulse shopping,” said Mariana Kou, CLSA’s consumer and gaming analyst in Hong Kong. “They tend to wait a little if the economy is pretty uncertain.”

At the Gucci store in Macau’s Wynn casino, four men clustered around a glass counter examining leather wallets, while seven other men browsed items such as the 6,000 patacas ($750) shoulder bags. Only two women were in the shop at the same time, while other customers queued up outside, waiting for security guards to let them in.

CDT previously reported on the growing presence of luxury brands, such as Prada, as well as the high street fashion brands vying for the Chinese market. The South China Morning Post reports PPR, which owns Gucci and Yves Saint Laurent, are looking to expand its stakes in China’s male market:

PPR, the French luxury and sportswear group headed by the billionaire Francois-Henri Pinault, which owns the sportswear brand Puma as well as Gucci and YSL, bought a large stake last month in Qeelin, the Hong Kong jeweller founded by local designer Dennis Chan and the French entrepreneur Guillaume Brochard in 2004.

Qeelin has seven shops on the mainland, four in Hong Kong and three in Europe. PPR did not disclose its holding in Qeelin or what it paid for it.

Alexis Babeau, managing director of the luxury division at PPR, said the Paris-based conglomerate will focus on “making small and high-growth investments, which should offer synergies and avoid cannibalisation of our existing portfolio”.

“The acquisition of the men’s clothing label Brioni, which once dressed James Bond, has broadened our reach to tailor-made suits, representing our commitment to the market for male fashion,” Babeau said.

Although foreign brands, such as Burberry and Louis Vuitton, have been profiting from China’s fashion forward men, Chinese brands are struggling in the luxury market, from The People’s Daily Online:

Established Shanghai brands should be offered financial aid from the government to ensure their survival. That was the message given to the city’s top political advisory body over the weekend.

An earlier report by the Shanghai Academy of Social Sciences said just 10 percent of Shanghai’s traditional brands are making a healthy profit. Roughly 70 percent are struggling, with the rest on the verge of bankruptcy.

Shanghai is home to many household brand names, including Three-gun underwear,Conch shirts and Maling food. In the 1980s and early 1990s, it was fashionable to be seen wearing Shanghai-made products. But as more overseas brands have arrived in China, local names have lost their place in the market.

“Foreign brands are much stronger, not only in financial strength but also many have aclear strategy,” said Qi Xiaozhai, director of the Shanghai Commercial Economic Research Center. “They came into China with a Westernized look that was desired by many young Chinese.”

Amid this spending trend, Chinese state media published an article by Colin Speakman, an economist and director of China Programs at CAPA International Education, warning against overspending, from China Daily:

In Western economies, the rainy day provision often comes from access to credit from unused credit card balances or equity withdrawal from housing assets. We know the dangers that uncontrolled access to credit can bring in the West, yet we see increasing marketing of credit cards in China to the younger generation. Caution is urged here.

Hence, China faces a difficult balancing act in transition. It remains important, in an era of apparently lower economic growth, to hold on to modestly paid jobs in the export sector where labor costs and controlling any significant appreciation of the yuan remain key factors.

If that is not done, multinationals will increasingly look to countries like Cambodia, Laos,Indonesia and Vietnam for lower costs. Yet, if more demand can be internalized within China, it would increase household income from employment in higher added value industries and the resulting higher incomes would help consumers to afford higher priced products – a virtuous cycle.

It makes more sense for China to increase consumer spending in the general market (as opposed to just the high-end market) to raise the living standards of the majority of workers.

© Melissa M. Chan for China Digital Times (CDT), 2013. | Permalink | No comment | Add to del.icio.us
Post tags: consumerism, fashion, luxury brands, luxury goods
Download Tools to Circumvent the Great Firewall

Yeoh warns that any sort of direct play requires research, but he has some handy tips. He says investors should look at what the Chinese will want to buy during the next decade. He also prefers established Western companies with a healthy exposure to China’s growth, notably luxury-goods companies.

”Generally, you would think that the corporate governance would be better for Western companies,” he says. ”There’s going to be more disclosure, and it’s a lot easier to understand a luxury-goods company generally than some sort of Chinese internet company.

[...] The downside is that the appeal of luxury brands can be fickle, and the saturation of brands could render them unpopular. ”[Shanghai women] always pride themselves as the most sophisticated and elegant and most open to the West,” Yeoh says. ”When they see the mistresses of the Shanxi coalminers wearing Louis Vuitton … they need to be wearing something else.”

See more on luxury demand in China via CDT.

© Mengyu Dong for China Digital Times (CDT), 2012. | Permalink | No comment | Add to del.icio.us
Post tags: conspicuous consumption, foreign businesses, foreign investments, luxury, luxury brands, middle class, mistresses, urban life
Download Tools to Circumvent the Great Firewall

J.Crew Group Inc., the apparel retailer whose customers include U.S. First Lady Michelle Obama, is planning its first Asian store in Hong Kong targeting tourists from mainland China that totaled 28 million last year.

The retailer may open the Hong Kong store as early as next year and is also looking for sites in Beijing and Shanghai, Chief Executive Officer Mickey Drexler said in an interview in Hong Kong.

Closely held J.Crew is pushing to reach Chinese shoppers as competition heats up and economic growth slows in the world’s most populous nation. The apparel company will join brands including Abercrombie & Fitch Co. (ANF) (ANF), Gap Inc. and Burberry Group PLC (BRBY) in courting tourists from China’s mainland in the former British colony.

Founded in 1983, J.Crew has more than 200 stores in the U.S. and Canada and is preparing to expand in Europe and Asia. Drexler said today that the company will open a store in London next year, ahead of Hong Kong. In 2008 the company pulled out of Japan, where it had some licensed stores through a partnership. It presently doesn’t have any stores outside the U.S. and Canada.

According to The Wall Street Journal, Hong Kong is among the top e-commerce markets for the brand, but it is still unclear whether J. Crew will be well received:

It isn’t clear whether the U.S. line will be well-received in China, where consumers favor luxury European brands and logos. The late entrance of U.S. retailers into China means they have to try harder to build brand recognition and loyalty.

“It is easy for a Chinese consumer to understand Gucci, ‘It is expensive, so it must be good, and you must be someone if you have it.’ How does a Chinese consumer understand the history and lifestyle that [a particular U.S. brand] represents?” said Franklin Yao, chief executive of consulting firm SmithStreetSolutions.

J.Crew this year started shipping online orders to more than a hundred countries as a way to test the markets. Hong Kong, Japan and Australia are now among J.Crew’s top five international e-commerce markets.

Building brand recognition in Asia, particularly in China, will be a challenge. J.Crew will have to compete with the dozens of midtier international clothing names already in the market. Pricing is an issue for new brands entering China, Mr. Yao said, especially with the advent of international shipping from e-commerce sites and the growth of Chinese travelers shopping abroad.

© Melissa M. Chan for China Digital Times (CDT), 2012. | Permalink | No comment | Add to del.icio.us
Post tags: clothing, fashion, fashion industry, foreign companies, luxury brands
Download Tools to Circumvent the Great Firewall

Luxury labels have thrived in China and now their cheaper High Street counterparts are betting that young, fashion-conscious shoppers like Ms Yu, 20, will help them weather weak economies in their home markets in the US and Europe.

“They target a very different consumer segment compared to their luxury counterparts, but being Western brands they will always have a certain cachet with the Chinese consumer,” says Ashma Kunde, a London-based global retail analyst at research group Euromonitor.

However, they will encounter stiffer competition from established local chains than their luxury forerunners, and with many brands expanding aggressively in China, they will also be vying with each other for customers.

Many brands have ambitious plans for China and others are entering the market for the first time this year.

Although western brands are thriving in China, local designers are emerging in the urban scene. Aside from street fashion designers, China’s luxury designers are also on the rise, according to Asiaone Plush:

For many years designer Guo Pei drew inspiration for her luxury clothes collections from travelling abroad, but recently she decided to focus solely on China’s culture.

China has in recent decades become known as the workshop of the world, with tens of thousands of factories pumping out cheap products for shops globally sporting a ‘Made in China’ label that often evokes poor quality.

But Chinese firms such as Guo’s are now using the label as a marketing tool to create a new generation of home-grown luxury brands and convince the country’s legions of rich to ditch their Chanel clothes and Bordeaux wines.

Today, China boasts roughly 15 to 20 brands – ranging from watches, jewellery, fashion or cosmetics – that are riding this wave, hoping to compete with foreign firms in what has become the biggest luxury market in the world.

© Melissa M. Chan for China Digital Times (CDT), 2012. | Permalink | No comment | Add to del.icio.us
Post tags: designers, fashion, luxury brands, luxury goods, urban life, youth culture
Download Tools to Circumvent the Great Firewall

China’s trade partners feel the pain of “deceleration” in both directions, including the ports of Southern California. And with China’s economic growth under siege both at home and abroad, economists don’t believe Saturday’s RRR cut will solve the economy’s problems by itself and instead see it as a prelude to a broader economic stimulus policy by the government. From The New York Times:

“We expect more aggressive delivery of policy stimulus via quantitative easing, substantial tax breaks, fiscal spending and investment deregulation in the coming months to ensure a soft landing,” Qu Hongbin, the co-head of Asian economic research at HSBC, said in a report.

…

Interbank lending rates have been sinking in China, a sign that the banks have plenty of spare cash even without being told that they can hold smaller reserves.

The cut in the reserve ratio should be seen “more as a signaling device used by the government to show its willingness to loosen policy in light of the significant weakening in activity growth in April,” Yu Song, an economist at Goldman Sachs, wrote in a research report.

The state-run China Securities Journal hinted on Monday that any broader economic stimulus package would likely involve another RRR reduction, but MarketWatch’s Craig Stephen pointed out that attempts to expand lending might be met by a “demand deficit” as the amount of profitable investment opportunities continues to shrink. Still, Reuters reports that economists had already rushed to update their growth forecasts after the week’s bad news:

“We were wrong and we revise down growth forecasts,” was the straight-to-the-point heading in the message line of an email sent to clients by Ting Lu, China economist at Bank of America/Merrill Lynch in Hong Kong after Friday’s torrent of data drowned his call of a Q2 GDP bounce to 8.5 percent.

He now expects growth of 7.6 percent in Q2 and 8 percent for the year versus 8.6 percent previously. The consensus forecast for 2012 growth in the benchmark Reuters poll before Friday’s data was 8.4 percent.

Lu is struggling to understand why the April data was so far away from market expectations and thinks a new reporting system requiring China’s 700,000 biggest manufacturers, representing 90 percent of the total value added in the factory sector, to submit numbers directly the National Bureau of Statistics in Beijing – rather than local offices – might be the root cause.

Whatever is behind the drop-off, the new consensus view is that Beijing will have to raise its game to stop the rot.

With research analysts across the street cutting growth forecasts, and with the ongoing political standoff in Greece weighing even further on the confidence of investors, mainland stocks fell to their lowest level in three weeks on Monday and slid again on Tuesday to a 1-month low.  China’s Ministry of Commerce poured fuel on the fire by announcing on Tuesday that foreign direct investment (FDI) declined for a sixth straight month in April. Whether because of a lackluster global economy or a slowing Chinese machine, or both, one economist told Bloomberg TV that all signs seem to point in the same gloomy direction:

“Trade data was bad, production data last week was bad, and this time FDI is also pointing to the same direction,” Zhang Zhiwei, chief China economist with Nomura Holdings Inc. in Hong Kong, said in a Bloomberg Television interview today. The reports show a “very weak economy at this moment,” with chances of an interest-rate cut rising though “still below 50 percent,” Zhang said.

In his Bloomberg View column, William Pesek writes that “nobody beats the system” and reminds anyone who hoped for unimpeded economic growth in China that “no industrializing nation has ever avoided a financial crisis.” Even The China Daily noted that the slowing growth rate is “within expectations” though not indicative of a hard landing. Tsinghua University’s Patrick Chovanec told The Financial Times that despite the desire of many to write off a slow first quarter as “just a little dip,” April’s data shows that “those forecasts were mostly a triumph of hope over reason”:

“China’s been riding an investment boom over the last three years that everyone recognised was unsustainable and now we’re seeing what unsustainable looks like,” Mr Chovanec says. “The unravelling of this investment boom is happening with nothing to replace it and that means China is in store for much lower GDP growth than we’ve become accustomed to.”

Spotlight: State-Owned Monopolies

China made another move to limit the dominance of state-owned enterprises this week, part of its plan to structurally reform the economy, as the Supreme Court established new rules that will open the door for more antimonopoly challenges and allow plaintiffs to more easily make their case. From The Wall Street Journal:

The rules, which will go into effect June 1, are meant to “improve the competitiveness of enterprises and promote the healthy development of a socialist market economy,” said a court statement issued Tuesday.

Legal experts say the rules will lower the burden on plaintiffs to prove the existence of a monopoly. They also appear aimed at addressing mounting pressures from both inside and outside China to scale back the power of the nation’s vast state-owned firms and make way for more competition from private companies.

…

The new rules say plaintiffs in antitrust cases can now prove a defendant’s market dominance by using a defendant’s old and existing company statements, press releases and website information that state its leading market position. Third-party market analysis can also be used if agreed on by plaintiffs and defendants, and if an agreement can’t be reached the courts will appoint an expert, the rules say.

Luxury Brands Still Growing:

Amid the market slowdown, The China Daily reports that international luxury brands such as Gucci recognize the need to retool their China strategy:

“Yes, the rate of expansion will be slower than in the previous years,” Patrizio di Marco, president and CEO of Gucci, told China Daily.

Some other luxury brands, including LV and Chanel, will also slow their expansion in China starting this year, business analysts said.

Rather than just expanding their stores in China, the leading luxury brands are starting to pay more attention to upgrading their current stores.

Despite the slowdown, Gucci will relocate and enlarge some of its stores in China.

“It’s not (store) numbers, it’s how you engage with your customers that counts,” Di Marco said.

While growth in the sector may continue to slow, and several potential roadblocks exist, a new report by CLSA Asia Pacific Markets expects that China will continue to lead the global luxury boom. From The Wall Street Journal:

Mainland-Chinese customers generate roughly one-third of Gucci and Prada’s world-wide sales, he added, and it’s not uncommon for rich Chinese to spend one-quarter of their disposable income on luxury goods.

They are also, Mr. Fischer pointed out, becoming more discriminating. Gucci and other retailers are stocking fewer logo-emblazoned items in their Chinese stores as shoppers begin to gravitate to more subtle displays of wealth.

Other News

• Hong Kong’s securities regulator has proposed new rules that would leave banks criminally liable if they act as IPO sponsor for a company that lies to investors.
• The Chinese government cut fuel prices for the first time since October, a move which helps motorists but will hurt the bottom line of the country’s oil refiners.
• China’s National Development Reform Commission has ruled that private equity funds must raise 100% of their money from local sources if it wants to be treated as a local fund, a blow to foreign firms who already face a higher hurdle than their mainland counterparts.
• At Berkshire Hathaway’s annual shareholder’s meeting this weekend, Warren Buffet was asked how long it would take for China to see a great company like Coca-Cola.
• Swiss banking giant Credit Suisse will move bankers to the mainland and apply for a stock trading permit as it seeks to take advantage of looser restrictions on foreign investment banks in China.
• Ford is trying to play catch-up with its rivals in China but faces headwinds, according to Reuters.

© CDT Money for China Digital Times (CDT), 2012. | Permalink | One comment | Add to del.icio.us
Post tags: domestic demand, economic stimulus plan, foreign direct investment, Fuel Prices, GDP, hard landing, imports, IPO, legal reform, lending, luxury brands, monetary policy, monopoly, private equity, required reserve ratio, state-owned enterprises
Download Tools to Circumvent the Great Firewall