CHINA:GETTING RICH IS GLORIOUS

[Anonymous]

In China, To Get Rich Is Glorious
More Chinese are becoming millionaires — and driving a fast-growing market for luxury goods
Wang
Zhongjun is loaded and happy to flaunt it. He wears Prada shoes,
Versace jackets, and a Piaget watch. He smokes Cohiba cigars from Cuba.
He drives a white Mercedes-Benz  SL600, a silver BMW Z8, and a red
Ferrari  360. His art collection includes hundreds of sculptures and
paintings. Value: $30 million or so. Home sweet home is a 22,000
square-foot mansion north of Beijing with antique British and French
furniture, a billiard room with bar, and an indoor pool. When he tires
of swimming, Wang can head to his stable (annual upkeep: $500,000) of
60 horses from Ireland, France, and Kentucky. “Entrepreneurs in China
today feel much safer than before,” says Wang, a 45-year-old movie
producer who served in the Chinese army, studied in the U.S., and
learned painting before backing internationally acclaimed films such as
Kung Fu Hustle. “We are more accepted by the media, government, and
society today.”
That’s for sure. Even though Deng Xiaoping declared
that getting rich is glorious nearly three decades ago, just a few
years back China’s millionaires were running scared. When a Forbes
Magazine survey of China’s richest appeared in 1999, wags called it the
“death list” after a tax crackdown targeted many who made the cut and
landed some in jail.
Now China is embracing them. More than 300,000
Chinese have a net worth over $1 million, excluding property, according
to Merrill Lynch & Co. . And mainland millionaires control some
$530 billion in assets, Boston Consulting Group estimates. “There has
been a revolution in attitudes toward wealth,” says Rupert Hoogewerf,
who authored the 1999 list. He now runs Hurun Report, a Shanghai-based
company specializing in information about China’s rich, which just
released a survey on millionaires’ buying habits. “People don’t
appreciate how much cash there is running around in China today,” he
says.
“DIZZY” OVER SHOES
Many people might not appreciate it,
but luxury retailers sure do. Just five years ago mainland buyers
accounted for 1% of global sales of luxury handbags, shoes, jewelry,
perfume, and the like. Today the Chinese are the third-biggest high-end
buyers on earth, with more than 12% of world sales, Goldman, Sachs
& Co.  reckons. Within a decade, China will likely leapfrog Japan
and the U.S. to become the top luxury market, predicts Goldman analyst
Jacques-Franck Dossin. “China is experiencing huge wealth creation, and
there is lots of conspicuous consumption related to that,” Dossin says.
“People want to show they are successful.”
How? By buying custom
clothes, diamond-encrusted watches, pricey cars, gourmet meals, and
fine wine. Zhao Hui, a chain-smoking 38-year-old restaurateur, real
estate developer, and Ferrari owner from Shanghai, says he speaks no
English, but he manages to pronounce “shopping” and “Tiffany”as he
shows off his $50,000 Franck Muller watch. Richard Hung, a 43-year-old
manager of a pharmaceutical company, has a closet filled with dozens of
Armani, Gucci, and Canali suits and more than 100 pairs of Italian
shoes. “I get dizzy when I look at shoes,” he says. Where to wear those
duds? Try Beijing’s exclusive Chang An Club, where few blink at the
$18,000 initiation fee. “Our members can afford it,” says General
Manager Antonius van Gevelt, adding that Chang An aims to keep its fees
higher than rival gathering spots. The rich “want to join the most
expensive club in China,” he says.
Luxury marketers are happy to
serve up plenty of flash and bling to keep sales rolling. Louis
Vuitton, which has a dozen boutiques across the mainland, in November
served up 1,500 bottles of Veuve Clicquot and platters of pâté de foie
gras at the celebrity-packed launch of a new Beijing store. And
fashionistas still marvel at Miuccia Prada’s “skirt show” last spring,
when she took over seven stories of Shanghai’s art deco Peace Hotel.
CADILLAC CAFE
Pricey
wheels do pretty well, too. The Rolls-Royce outlet in Beijing is one of
the brand’s top-selling dealerships. And Bentley Beijing has sold a
half-dozen 728 stretch limos — at $1.2 million each, the world’s most
expensive car — more than any other dealership in the world. For
thriftier millionaires without an extra million to drop on
transportation, Cadillac, Mercedes, or BMW are eager to help. Shoppers
at any of a dozen “Cadillac Experience Centers” in the mainland, for
instance, can relax on a black leather sofa and enjoy a glass of
Rosemount Cabernet in the “Cadillac Cafe” while browsing through
photo-rich brochures that describe the brand’s 102-year history. “Our
whole showroom supports our brand: It’s modern, sophisticated, and not
your traditional luxury vehicle,” says Stuart J. Pierce, who oversees
the Cadillac brand at Shanghai General Motors Co. .
Now the luxury
goods marketers are looking far beyond Beijing and Shanghai to find
China’s millionaires. Cadillac plans to have 40 showrooms in China by
the end of 2007, and last year dispatched a 1959 El Dorado convertible
on a seven-city “heritage tour” to drum up interest nationwide. At this
month’s ice festival in the frigid northern city of Harbin, watchmaker
Cartier has created a massive ice replica of its flagship Paris store.
“Our aim is to have the second- and third-tier cities become a more
important part of our business,” says Daniel Chang, who oversees
Cartier’s sales in northern China.
Lately China’s new moneyed class
has gotten interested in more than fast cars, flashy threads, and
extravagant timepieces. Growing numbers of mainlanders are snapping up
everything from ancient scrolls and traditional ink paintings to French
Impressionists. Christie’s International says mainland buyers account
for 20% of purchases at its Hong Kong auctions, compared with virtually
none five years ago. And while most collectors prefer Chinese art,
mainlanders now bid on Renoirs, Monets, and Van Goghs in New York and
London, and a Shanghai businessman paid $1 million for a Picasso in a
private sale. “There’s tremendous potential,” says Ken Yeh, deputy
chairman of Christie’s Asia .
en as the likes of Cartier,
Christie’s, and Cadillac try to separate China’s millionaires from
their wealth, others aim to help them preserve it. Although foreign
banks are barred from marketing their offshore services inside China,
they are discretely wooing mainland clients via their Hong Kong
offices, figuring those who have made money abroad are fair game. And
soon, banking regulations in the mainland are to be relaxed. “In the
long term, China can surpass Japan as a major market for wealth
management,” says Kaven Leung, who oversees Citigroup’s private banking
efforts in China.
Diamond watches. Armani suits. Silver Bentleys.
Private banks. Getting rich in today’s China is indeed glorious, and
spending is even better.

[Author]

February 2, 2006 at 11:26 AM