Chinese consumers behavior overseas unreasonable but inevitable

At a time when the whole world is entangled in economic difficulties, frantic Chinese shoppers are rushing overseas to purchase luxury goods, showing their strong consumption capability to the outside world.

This panic-buying phenomenon confuses foreigners and they wonder whether China is really a poor developing country. The outside world’s bewilderment is natural since China’s luxury consumption volume has surpassed Japan and ranks the second in the world, only US citizens buy more luxury goods, but it defines itself as a developing country with considerably lower per capita GDP than western countries and a yawning gap between the poor and tne rich.

China is not as  rich as western media portray, especially at a time when property and food prices are soaring. The majority of Chinese people’s incomes are utilized on these two and they don’t have  much disposable income. But, there is no denying that a large number of Chinese are obsessed with luxury goods and their shopping expenses account for 50 percent of  overseas travel expenditures. One reason for this seemingly contradictory phenomenon is the growing number of newly rich in the country, who pursue a branded,  high-quality life style. Another reason is that Chinese people feel that oversees products are usually of higher quality than domestic goods, especially considering the  food safety and fake goods scandals that frequently occur in China.

But as some experts point out, such consumption is unreasonable since Chinese consumers over-emphasize buying foreign luxury brands a clear indication of a conspicuous-consumption attitude.

But this frantic buying will continue for a long while yet, as Chinese buyers replace Japanese and South Korean  consumers as key players in the global luxury goods market. An increasing volume of luxury consumption is a common phenomenon in many countries experiencing wealth accumulation. At the time when Japan was enjoying fast economic and wealth growth, it became the largest  consumer of luxury goods  in the world. Now western media are calling China the “new Japan”.

The Chinese luxury consumer bears similar characteristics to their Japanese counterparts a decade ago: the notably growing expenditure and the pursuit of internationally famous brands. According to the usual pattern that a country’s luxury consumption growth rate is two times higher than the GDP growth rate. China’s luxury demand and consumption will continue to soar.

But with the country’s further economic development, Chinese people’s consumption concepts will gradually become mature and rational. After the bubble economy broke in Japan, the country’s citizens began to live a simple life and they tended to give their friends more practical goods as gifts such as daily necessities and coupons. But it is a long process and many people paid a high price.

What we can do now is to shorten the price-paying process. To achieve this, the first thing China should do is to establish its own high-quality brands worldwide. Only if China owns internationally famous brands, will customers transfer their shopping desires onto the domestic market and as a result stimulate domestic demand which  is a priority for China’s Twelfth Five-Year Plan (2011-2015).

Another thing China can do is to reduce domestic distribution costs and cut the tax on  luxury goods. The price of a luxury item sold in China is usually significantly higher than the price for the same item in Western countries. Even those luxuries produced and processed in China cost much more at home than abroad. Therefore, it is essential to improve the distribution cost structure and establish a reasonable tax system for luxury goods in order to stimulate  domestic demand.

The frenetic buying of Chinese tourists overseas is unreasonable but inevitable during the country’s economic transition period. One day when we learn to appreciate a simple but comfortable life style, when we boast our own internationally renowned brands and when our economic structure is optimized, Chinese consumers will be reasonable and mature.

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