On the crazy Black Friday in the U.S., you may notice that there are lots of Chinese consumers staying in line and waiting for buying luxury products at a cheaper price. Now, more and more Chinese luxury buyers go abroad, especially go to Europe . Chinese shoppers aren't spending money the same way they once were.
As shown in the article, "the Federation of the Swiss Watch Industry figures that in September's the total values of Swiss watch export was 2.7 percent lower than in the same month a year earlier in 2011 The biggest downturn in sales came from China, where sales are down around 27 percent, while in Hong Kong sales were down 19 percent.""Chinese payment processing company UnionPay recorded foreign transactions were up 33 percent from a year earlier, which is a sign that Chinese are making more and more luxury purchases abroad "
The export data of September show that the worst down of the whole luxury industry export not only just the Swiss Watch Industry, and the weakened Chinese luxury market. It has been cause by the China's export tariffs, product pricing strategies, Chinese desire of luxury goods make the huge difference on the prices of the same product in two different countries. "Sometimes in excess 300% up to four-fifths of Chinese luxury goods consumption reportedly takes place overseas", according to Why Are Luxury Goods So Expensive In China.
"Louis Vuitton's Speedy 30 handbag, for example, retails in China for 5,750 yuan (US$907) but costs US$763 in Hong Kong and US$632 in France. A 30 ml bottle of Estee Lauder's Advanced Night Repair Synchronized Recovery Complex sells for 1050 yuan (US$165) in China but for just US$52 on the company's official American website."
High duty is the major factor that keeping the luxury product at a much higher price than other countries. "According to HSBC's China Luxury Tax Report, there are three types of taxes on imported luxury goods in China: consumption tax, VAT and custom duty. For example, the current consumption tax, VAT and custom duty for cosmetics are 30%, 17% and 10%, respectively, which are high compared with elsewhere.""In China, imported gold, silver and jewelry attract a duty of 10 percent. Clothing and watches are levied at 20 percent. The highest tax rate is for cosmetics and liquors, 50 percent."
Now, very few Chinese will buy luxury product in China unless they are very rich and don't care about the huge differences of the price. Since the prices of luxury product in the U.S. and Europe are much lower than China, Chinese have spent lots of money on luxury goods when they go abroad. And then, the money goes abroad,too.
In conclusion, when a country put high duties on a imported good, it will hurt the country itself. There is not much possibility and not much help to reduce the duties. What China should do is to have its own luxury industry and luxury brand culture.
Source:
Luxury Watches and China's Slowdown
Written on November 1, 2012 AT 9:44 AM BY ADMIN
http://www.jewelryne.ws/luxury-watches-and-chinas-slowdown/
Why Are Luxury Goods So Expensive in China?
http://www.wantchinatimes.com/news-subclass-cnt.aspx?cid=1502&MainCatID=15&id=20120321000001
Luxury Watches and China's Slowdown
Written on November 1, 2012 AT 9:44 AM BY ADMIN
http://www.jewelryne.ws/luxury-watches-and-chinas-slowdown/
Why Are Luxury Goods So Expensive in China?
http://www.wantchinatimes.com/news-subclass-cnt.aspx?cid=1502&MainCatID=15&id=20120321000001
Yeah it is true that the high import tariff on luxury products protects the Chinese producers in luxury dustry and bring profits to the government at the expense of the Chinese consumers. However, I think it's helpful to reduce the tariff if the original tariff was unreasonably high that exceed the optimal tariff. If the tariff is too high , the importer's welfare may fall below the free-trade level of welfare. So I'll say China should better adjust the import tariff on luxury products to the optimal tariff.
ReplyDeleteI agree China should lower their tariffs on imported luxury goods, but if they dropped the tariffs what would happen to the Chinese producers of luxury items? How many jobs would be lost because of this? Another question might be; is China putting such high tariffs on imported luxury items to solely protect the Chinese producers, or are there other underlying reasons for the tariffs? These tariffs do seem to be hurting China more than helping it though, because the more expensive the imported goods are for Chinese consumers, the less they buy. The less Chinese consumers buy imported products in China, the less China will import; causing China to lose money. However China makes more by exporting goods, so perhaps China keeps the high tariffs on luxury goods in order to keep their imports at a lower amount.
ReplyDeleteI think that the Chinese government is trying to get its luxury producers to export their product in hopes that it would achieve the popularity that other brands have. This would add a lot of value to their economy because as of now they only manufacture these items.
ReplyDelete