Sunday 4 October 2009

Luxury brands doing brisk business in China

But wealth boom widens income gap further

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Guanyu said...

Luxury brands doing brisk business in China

But wealth boom widens income gap further

Bloomberg
02 October 2009

(BEIJING) At China’s newest Gucci store, in Shijiazhuang, snakeskin purses sell for the equivalent of US$4,390, about twice the city’s per capita annual income. Next door at Brooks Brothers, button-down shirts go for US$190.

‘Shijiazhuang is becoming very well off,’ Brooks Brothers saleswoman Wang Weixia, 24, says of the provincial capital, 291 kilometres south-west of Beijing. ‘A few years ago, it was poor and backwards.’

Five floors up in the food court of the First Under Heaven mall, a lamb kebab griller surnamed Li has a different view. ‘The people here got rich by cheating others,’ says Li, who earns 50 yuan (S$10.35) a day.

The scene in Shijiazhuang is replayed across China, where a 30-year economic boom has lifted hundreds of millions of people from poverty at the price of yawning income gaps. China’s Communists came to power 60 years ago today, promising a utopian society run for the benefit of peasants and workers.

Instead, it was ideological foes in neighbouring Taiwan and South Korea that delivered economic gains more widely and equitably.

The growing wealth gap is a top concern for President Hu Jintao and Premier Wen Jiabao, who are dealing with rising protests from workers and farmers who are angry at corruption and the perception that some people are getting rich at the expense of many.

Mr. Hu and and Mr. Wen yesterday took part in celebrations in Beijing marking the anniversary.

In a Sept 10 speech to the World Economic Forum in the city of Dalian, Mr. Wen said that China must ‘narrow the gap in income distribution’.

In China, ‘economic reform has not exactly been the tide that raised all boats’, said Nicholas Bequelin, a Hong Kong-based researcher for Human Rights Watch, which campaigns against abuses of power and for political freedom.

Nationwide, the number of so-called mass incidents - including strikes, demonstrations and riots as well as ethnic clashes - rose to about 90,000 last year from more than 80,000 in 2007, according to Wang Erping, a scholar at the Chinese Academy of Sciences in Beijing who studies unrest.

Many of those protests stem from anger that people are getting ahead through corruption, Mr. Bequelin says.

Official graft cost China as much as US$86 billion a year and the chances of a corrupt official going to jail were less than 3 per cent, according to a 2007 study by the Washington-based Carnegie Endowment for International Peace.

China’s wealth boom is creating a surge in spending on luxury goods. Gucci Group, owned by Paris-based PPR SA, says sales in China, including Hong Kong and Macau, accounted for 17 per cent of global revenue in the first three months of this year.

Gucci has six stores in Beijing, the same number as in metropolitan New York, its website shows.

Beijing has more wealthy people than any other city in China, with 143,000 worth 10 million yuan or more and 8,800 with assets of at least 100 million yuan, according to the Hurun Report, which tracks China’s rich.

Guanyu said...

At the same time, 204 million people in China lived on US$1.25 a day or less as at 2005, a 2008 World Bank study showed.

Expenses for health care and education, once provided at no cost for many workers, are pushing more people into poverty, said Dorothy Solinger, a professor at the University of California at Irvine who studies China’s urban poor.

‘There isn’t a sense of upward mobility,’ Prof Solinger says. ‘There is a perpetuation of underclass.’

Outside the Gucci store in Shijiazhuang, a weathered young man from the countryside surnamed Lu delivers water to the mall on a three-wheeled motorcycle.

In a good month, the work pays about 1,000 yuan, he says.

‘There’re a lot of rich people in Shijiazhuang,’ he says, pointing to new apartment buildings across the street.

At a nearby Rolex store, saleswoman Shen helps to sell dozens of the Swiss-made watches each month. One gold ladies’ timepiece was priced at 158,700 yuan. ‘Business isn’t too bad,’ she says.