Economist: Chinese shoppers account for 6% of world’s consumer spending, but 20% of global luxury goods sales

MOST shop windows proudly showcase what can be bought inside. The window of the Silk Street Market, a touristy shopping centre in Beijing, is a bit different. It displays a pair of official notices advertising what cannot be bought inside. These non-offerings include luxury brands such as Prada, Louis Vuitton and Burberry. The notices are meant to save customers from buying fakes unwittingly. But many still buy them wittingly. You could almost say that counterfeits remain Silk Street’s trademark, despite the market’s efforts to stamp them out. On the ground floor, a purple “Paul Smith” polo-shirt from a Guangzhou factory was offered to your correspondent for 1,285 yuan ($200), a price which eventually fell to 150 yuan. It is not easy to walk away from such bargains. Especially when the stall holder will not let go of your coat.

Economists and policymakers around the world want China to consume more. They are eager for it to reduce its dependence on investment, which amounted to almost half of GDP last year. No economy that invests so heavily can possibly invest it all wisely. Economists therefore worry about a widespread misallocation of capital, or “malinvestment”. But some of China’s consumption is also a bit questionable.

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Fake goods are rife. Researchers once stopped every fifth person in a Shanghai mall and asked them about their buying habits. Of the 202 who completed the survey, almost three-quarters admitted to buying knock-off luxury goods. The resulting paper* by Ian Phau and Min Teah of Curtin University of Technology in Australia was titled “Devil wears (counterfeit) Prada”. Some people buy luxury brands as an act of self-expression. Others buy them as an act of social emulation. They want to wear the same brands as the people they aspire to be. The Chinese are more likely to be this second type of buyer, according to Lingjing Zhan of Hong Kong Polytechnic University and Yanqun He of Fudan University. And, other studies suggest, such status-seeking consumers are more likely to buy counterfeits.


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