A sales assistant arranges the gold rings at a store in Shenyang in northeast China's Liaoning province.The Associated Press
For Prada, Gucci, Cartier and the world's other makers of luxury goods, China has become the great hope of salvation - the one place in the world where sales are increasing, rather than declining.
The newly emerging middle class, hungry to indulge in Western bling, are flocking to designer labels as never before.
"Luxury brand names are getting into the market very fast and this market is booming," said nattily-dressed marketing executive Anthony Chem after browsing Prada's Beijing flagship store in the upscale Shin Kong Place shopping centre.
He proudly shows off his Prada satchel, with matching Prada wallet and keychain, and his Cartier watch; his friends, he says, prefer Patek Philippe. "There are many newly rich and they need more things, and better things," the 48-year-old said.
China was home to 15 per cent of the world's 300 luxury-store openings this year, and a recent study by consulting firm Bain & Co. predicts sales of luxury items in the country will rise 12 per cent for 2009 - a marked contrast to the anticipated global drop of 8 per cent.
In the United States and Japan, the traditional big spenders, sales are expected to drop 16 per cent and 10 per cent, respectively.
In China, the rich are still getting richer, most of them remarkably shielded from the economic downturn that ravaged the ranks of "rich lists" in other parts of the world. This year's edition of the Hurun Rich List, compiled in Shanghai, found 130 U.S.-dollar billionaires in China, up from 101 last year and putting the country in second place, behind the United States.
Rupert Hoogewerf, chief executive officer of Hurun Reports, estimates the number of Chinese billionaires might actually be nearly twice that tally, since many of the country's wealthiest keep a low profile.
It's estimated another 825,000 people are U.S.-dollar millionaires.
"There's a lot of hidden wealth in China," Mr. Hoogewerf said, noting that international purveyors of private jets, yachts and luxury cars as well as jewellery and clothing are looking to China as the fastest-growing market anywhere.
PricewaterhouseCoopers forecasts that China will become the world's top buyer of luxury goods by 2015, and deluxe labels are rushing to snap up those future customers.
Fiat's luxury Ferrari unit expects China to become one of its top five markets within five years. Mercedes-Benz expects China to replace Britain as its third-biggest market next year. And Nissan has created a new convertible model specifically for Chinese customers.
"It's true - for most luxury brands, business is booming," said Rachel Zhu, a spokeswoman at watch maker Cartier's Shanghai head office. The company now has 30 boutiques in China with plans to expand next year.
"Compared to the worldwide market, China is really the hero at the moment," Ms. Zhu said.
Indeed, it is a point of pride for many up-and-coming Chinese, who have seen their country's economy grow while the United States and Europe struggle.
Analysts say luxury sales have not yet hit their full potential among China's wealthy, largely because of heavy taxes on imported luxury goods. And more cosmopolitan consumers who live in Shanghai and Beijing tend to wait until they're abroad to make their high-end purchases.
"All around the world, people are seeing mainlanders [Chinese]coming in to shop - in Hong Kong, Macau, London, Paris. Chinese shoppers are not stupid: They know these things are half-price outside China," said Paul French, a Shanghai-based analyst with Access Asia.
Even that limitation hasn't hampered expansion of luxury stores, thanks in part to breakneck growth in property development in major cities. Beijing in particular has a glut of office and commercial space, and developers continue to build, helped along by government spending to stimulate the economy.
As a result, many luxury retailers are able to scoop up prime retail space for well below what they would pay in other major cities. Developers, in turn, are eager to land them as "anchor stores" to entice other high-end shops and hotels as well as high-profile office tenants.
Given the modest leasing costs and low wages for sales staff, Mr. French argues that setting up shop in Chinese cities amounts to high-profile and effective advertising for international companies to create brand awareness.
"If you don't have the stores here, and you don't open everywhere and do the advertising, when the Chinese tourist goes abroad he doesn't know what he's looking at," Mr. French explained. "It's very, very cheap advertising."
The result is many beautiful stores with slow turnover, with the ritzy Shin Kong Place a prime example. Amid the slow trickle of customers on a weekday morning, few were carrying shopping bags. Even the Prada-loving Mr. Chem left empty-handed, reserving his purchases for his next trip to Hong Kong.
Another shopper, 31-year-old advertising executive Sun Aili, was visiting Shin Kong between business meetings after travelling to Beijing from the nearby city of Tianjin. Like Mr. Chem, she plans to hold off buying until she can go somewhere where prices are better.
"If I have the chance I will go to Hong Kong to buy - it's much cheaper there," she added. "But if I really like something, I will buy it here."
Special to The Globe and Mail