The 2012/03/26 at 05:40
The luxury sector has turned its eyes towards Beijing. According to the China Daily, import duties on numerous consumer goods, namely luxury products, are to be cut this year in China in order to support local consumption, a priority for the government in 2012. "Consumer and luxury goods will help promote domestic consumption and China needs to reduce import duties," announced Wei Jianguo, a former Deputy Commerce Minister, to the newspaper. "There will be at least two rounds of reductions this year on a large range of goods," he confided on the sidelines of the yearly session of the CPPCC (National Committee of the Chinese People's Political Consultative Conference). In his annual report on the government's work presented in early March, Prime Minister Wen Jiabao placed a priority on stimulating domestic consumption while diminishing growth forecasts for the year to 7.5%. "Expanding domestic consumption, especially consumer demand, is the key to China maintaining stable and rapid economic growth, and is this year's priority," indicated the Prime Minister.
According to its forecasts, China is to become the world's third largest market for luxury goods by 2015. High import duties have pushed many of the country's consumers to make their purchases in other regions or countries. According to the World Luxury Association, spending by Chinese consumers on luxury goods overseas reached, during the Spring Festival period, a record level of 7.2 billion dollars (5.5 billion euros), in other words a 28.7 % rise compared to the previous year. "Why not take some measures to get this huge consumption to flow back to China?" asked Liu Kegu, member of the CPPCC. The extent of the cuts has not been specified, but the margin for manoeuvring is high as retail sales prices of certain products, such as watches, leather goods and clothing are much higher than in other global regions: + 45% compared to Hong Kong, + 51% compared to the United States, + 72% compared to France, according to the Chinese Commerce Minister.
A drop in import duties in China would be good news for the luxury sector. However, the impact of such a measure on the growth of luxury groups needs to be put into perspective. Over 50% of spending on luxury products by Chinese customers takes place in China or overseas. Any repatriation of spending to mainland China would result in a mechanical loss of turnover in the tourist zones of Hong Kong or Europe. Nick Hayek, CEO of Swatch, pointed out this likelihood at the recent "Swatch Analysts" meeting, implying that a cut on import duties in China is not such a crucial matter in his opinion.