- Bloomberg News
- A man walks past a Cartier store, operated by Cie. Financiere Richemont SA, in Shanghai, China, on Wednesday, Feb. 6, 2013.
China’s consumers are coming under fire for doing their shopping overseas at a time when the country is trying to build up consumption on its home turf.
China’s state broadcaster ran a story on Monday highlighting the vast amount of money consumers are spending overseas to buy luxury goods abroad, evading mainland tariffs that increase prices on goods by 30% to 50%. The broadcast came shortly after a commentaryfrom China’s official Xinhua news agency that criticized luxury consumers, saying that they are avoiding tariffs that would benefit the nation.
Chinese people bought 25% of the world’s luxury goods in 2012, spending a total of 306 billion yuan ($49 billion), CCTV said, adding that of that money, 60% was spent abroad.
“If you have the money to spend, why not spend it at home?” Xinhua said in the commentary, adding that while prices are high and will partially benefit retailers, they’ll also keep jobs at home and help local logistics and commercial companies.
The finger-pointing from state media comes as hundreds of thousands of Chinese tourists return with full shopping bags from their overseas trips during Chinese New Year, one of the peak annual shopping seasons. China’s overseas buyers spend around €11,000 ($14,686) on each shopping trip to places like Europe, Singapore and Hong Kong, according to data from Global Blue, a shopping tourism service company.
Many plan their travel abroad specifically with shopping in mind, causing their purchases overseas to surpass those at home. In an August survey of 1,200 Chinese shoppers by consulting firm KPMG, 51% of the shoppers said they bought watches in Hong Kong, Taiwan or Macau during the 12-months prior to August 2012, while only 31% said they had bought one within China’s borders during that time.
The outpouring of money overseas also comes as China is trying to build up consumption at home as part of an attempt to rebalance the economy away from an over-reliance on investment and exports. Leaders have in previous years tried to stimulate domestic consumption, enticing China’s consumers, who are notorious savers, to spend their money by offering subsidized washing machines and other appliances.
Yet for luxury goods, China has kept its tariffs high, causing big price gaps. For example, one of Louis Vuitton’s popular handbags, the Speedy 30 bag, costs around 6,100 yuan ($964) in Beijing or Shanghai, while in Europe it costs around about $619.
So many consumers fly abroad to buy. Xinhua said that nearly 80 million traveled overseas last year, primarily driven by shopping desires.
Consumers reacted to Xinhua’s criticism in striking numbers on social media, with many standing by their decision to purchase goods overseas.
“Things are just too expensive here, so of course people are being swept overseas,” said one user of Sina Corp.’s Twitter-like Weibo microblogging service.
The state-media tongue-lashing over luxury buying habits ranked among the most discussed topics on Sina Weibo on Tuesday evening, with more than 370,000 posts in the previous 24 hours.
Another Weibo user said that trouble finding quality goods at home is also an issue that leads consumers to shop overseas. “If one day the quality could improve, people wouldn’t hesitate to buy domestic,” microblogger wrote.
Others urged officials to lower taxes on luxury goods to keep more sales in China.
There have been many pushes in previous years to lower tariffs on luxury items in China, but the discussion has gone on like an endless ping pong game between bureaucratic committees looking to boost consumption and others looking to preserve tax revenue. Advocates of the tariff argue that lowering it would reduce tax revenue that benefits the nation.
The Xinhua report deflected some of its consumer criticism to companies, noting that consumers don’t have all the options that they are offered overseas, such as various versions of the iPhone and other electronic goods.
Xinhua also hinted that change is needed from the government, saying that with hundreds of billions of dollars at stake, China should not stand powerless to change, “Through the joint efforts of the government and the market, consumers can be regained,” Xinhua said.
Comment: Time to bring down the import duties finally arriving?
Original Post http://blogs.wsj.com/chinarealtime/2013/02/19/china-gets-angry-at-overseas-luxury-shopping-trips/?mod=WSJBlog