The Commie consumers of China

As the Chinese economy booms, our reporter looks at the people’s great leap towards bling

By hoovering up the top positions in state-run enterprises and taking advantage of the vast government contracts that come with rapid industrialisation, party officials and their children have thrived in the brave new communism-with-benefits world. Those who started their own companies, especially in construction, have done even better. The new Hurun Rich List, of Chinese individuals with a net worth of over 10 billion yuan (£1 billion), numbers 127.

For those who did not have the foresight, or resources, to get into earth movers at the start of the boom, things are not so cheery. The national average income is 50,000 yuan (£5,000), less than Angola and Albania. Only 24 million of the population’s earnings are above the tax threshold. This vast gap between the ostentatiously spendthrift rich and the struggling poor has prompted a government rethink. Consumption, say the authorities, must become less conspicuous. Earlier this year, Beijing outlawed billboard advertisements that promoted “hedonism, lavishness and the worship of foreign things”.

Will this work? Avery Booker of the analytical website Jing Daily suggests that stealth wealth will become the new cha-ching: “While there will always be a market for garish, tank-like Russian SUVs, chunky diamond-studded watches and logo-festooned bags, the country’s ultra-wealthy, becoming ever more cautious about consumption, will likely gravitate towards boutique labels, private clubs and discreet concierge services.” None of which are exactly cheap.

In the meantime, what are the commie consumers spending their cash on?

Fashion

The mouthwatering profits announced by Prada last week - a 74 per cent rise, thanks to sales in Asia - have forced the fashion industry’s compass to face east. “We’re all in a recession but China isn’t, China is booming,” London-based Julien Macdonald said after his London catwalk show last week. “The new money is in China. Every designer in the world wants to break into the Orient.”

They will need sharp elbows as the smart brands are already well established. Prada sees Asia as its most important single market, with 12 stores opening in China in 2012. PPR, owner of Gucci, YSL and Bottega Veneta and LMVH, the luxury brand conglomerate which owns Louis Vuitton, Céline and Marc Jacobs, also have a significant presence in the country where spending on high-end clothing, jewellery, watches and bags was 80bn yuan (£8bn) last year. This expected to grow to 180bn yuan (£18bn) by 2015, which would represent 20 per cent of all global luxury spending.

In Shanghai, the fashion capital of China, Plaza 66 mall is like Bond Street in the sky, with Dior, Chanel, Prada, Versace, Armani, Louis Vuitton, Hugo Boss and Bulgari. Nicola Adamo, from the mall’s Dolce & Gabbana store, says: “What most of them want is brand names. Money is not a problem and if they like the brand, they can spend 100,000 yuan (£10,000).” Dropping £44,000 in one trip is not uneard of. “They come for a total look, not just a pair of jeans.”

Chinese men accessorise with as much enthusiasm as women and no male millionaire is seen about town without his man bag. Males account for 45 per cent of the luxury handbag market, worth 700m yuan (£70m). Some favour a clutch style, others prefer a messenger bag worn diagonally across the body.Burberry, Dunhill, Coach, Louis Vuitton and Prada are all desirable labels, with chocolate brown and dark grey the most popular colours. More flamboyant chaps experiment with Burberry checks, Vuitton’s distinctive initials and the odd dangly golden zip.

Cars

Is there a more potent symbol of China’s incontinent materialism than Han Nan, the vice-president of a lighting wholesaler, smashing up his Lamborghini? Enraged by persistent faults in his new motor, which cost 4.65m yuan (£465,000), Wan enlisted a team of heavies with sledgehammers to destroy the car in front of an astonished crowd on World Consumer Rights Day last October. The film went on to become a worldwide You Tube sensation.

Amazingly, Wan’s stunt has not damaged Chinese demand for the luxury Italian marque. They expect to have 20 dealerships by the end of the year and to sell 300 cars in China in 2011. Stephan Winkelmann, Lamborghini president says: “China is likely to be our biggest market this year. We see further growth potential in the China market as more and more young people desire an individual and uncompromising lifestyle.”

They are not the only prestige name in town. Ferrari expects to sell 600 cars this year, double 2010’s total. Porsche is predicting 20,000, a 40 per cent increase on the previous year. Audi, the first European luxury brand to break into China, has capitalised on its early advantage selling 240,000 vehicles in 2010 and anticipating more this year. The company has responded to market demand by increasing the length of its A6 and producing the A6L with more space in the back seats, thereby creating more leg room for executives as they are chauffeured between meetings.

For those jaded with leather seats and air con, the bicycle is enjoying something of a renaissance. Once the proletariat’s transportation method of choice, bikes are now deeply cool, appearing in the windows of Shanghai’s hipster boutiques, magazine covers and elite brand advertising. Midnight bike racing (to avoid the traffic jams) is the new snowboarding. Lamborghini’s fanciest model comes in at a mouth-drying 340,000 yuan (£34,000) and reconditioned Flying Pigeons and Phoenix bikes, the utilitarian bone shakers once ridden by Mao-suited workers, now cost 3,500 yuan (£350).

Yachts and planes

Once the Chinese government’s five-year plans were heavily skewed towards tractor production. The current one, by comparison, includes the construction of 200 new marinas.

Yachting has always been an obvious hobby for those seeking ostentatious ways to get rid of their cash, so it is unsurprising that the super yacht has become a popular Chinese purchase.

Sunseeker, a British boat builder, has sold 25 yachts to Chinese customers over the past two years. Specific tweaks for this market include smaller outdoor deck areas – sun-bathing and water sports are of little interest – and more space for entertaining guests below the waterline. On board karaoke parlours? No problem.

Bureaucracy, a shortage of airports and air traffic restrictions make the private jet the ultimate luxury in China. While experts estimate there are only 30 planes registered with the country’s civil aviation authority, there are more flying illegally, although penalties for this are harsh.

Once the red tape is loosened, Mike Walsh of Hong Kong-based Asia Jet estimates that China could easily overtake the US which has 200,000 private planes, the largest number in the world.

Dogs

Once bred for meat, Chinese dogs are now indulged as family pets. The enormous, jowly Tibetan mastiff is in particular demand as a patriotic status symbol; one of the world’s oldest breeds, allegedly kept by Genghis Khan and Lord Buddha, they are bred only in Tibet.

A puppy which would have cost 5,000 yuan five years ago (£500) now commands funny money.

A coal magnate from northern China has just paid 10m yuan (£1m) for Hong Dong (it means Big Splash), an 11-month-old canine mountain. He is three feet tall from paw to shoulder and weighs more than 80kg.

His breeder describes him as “a perfect specimen” and justifies the stratospheric price by adding that, as a puppy, Hong Dong’s diet included chicken, beef, sea cucumber and sea snails.

Wine

The most expensive single lot of wine sold at auction this year – 300 bottles of Chateau Lafite-Rothschild bottled between 1981 and 2005 – was bought by a Chinese dealer for $539,280 (£350,000) earlier this month. All the serious bidders at the Hong Kong sale were from mainland China. The two-day event made $7.6m (£5m).

Polo

It was only a matter of time before the most cash-thirsty sport known to man established itself in China. The newly-opened Tianjin Goldin Metropolitan Polo Club and Hotel has two international-sized polo fields and stables for 150 horses.

Annual membership starts at 380,000 yuan (£38,000) for a social members to 10m yuan (£1m) for the owners of polo teams. The club expects to have 3,000 members by 2016.

Art

When Christie’s sold Picasso’s Femmes Lisant (Deux Personnages) in spring, it surprised no-one when a Chinese bidder offered $21.3m (£13.7m). Chinese demand extends well beyond the superstar names of the 20th century; a scroll painting from the Imperial Palace in Beijing was sold for a $31m (£20m). Hedge fund manager Lawrence Chu collects Saatchi favourites Toby Ziegler, Mark Bradford and Dana Schutz.

Contemporary Chinese artists such as Zhang Xiaogang and Li Songsong command six and seven-figure prices. The Impressionists, 20th century decorative arts and contemporary Chinese artists – pretty much everything except the European old masters – are being collected in China and the Gagosian Gallery, White Cube and Ben Brown Fine Arts have set up branches to capitalise.

François Curiel, president of Christie’s Asia, thinks a Monet or a Braque in the boardroom is the entrepreneur’s ultimate status symbol.

“They think, ‘If I want to be not just a millionaire but someone who plays with the big boys, I’d better be someone who collects art.’”