Amid economic uncertainty, China’s rich are reluctant to show off their wealth | Wilnesh News

As the economy faces headwinds, China’s wealthy have become more cautious about showing off their wealth, putting pressure on the country’s luxury goods market.

The report said that in the face of a challenging macroeconomic environment, sluggish GDP growth and weak consumer confidence, China has experienced a so-called “luxury shame”, which has harmed the consumption of the middle class. Bain & Company June Report.

“It’s not that they’re not willing to spend money on luxury goods – in fact, we continue to see some very strong performance from some of the top brands in China, but it’s just that people are becoming more cautious about spending on some of the cravings and will continue to do so. Do this,” Bain & Company senior partner Derek Deng told Squawk Box Asia last month.

Claudia D’Arpizio, partner and global head of fashion and luxury goods at Bain & Company, told CNBC in a separate interview: “Wealthy customers are afraid of being seen as Being too ostentatious or showing off.

To be clear, this term is not new.

“We call it the luxury shame, similar to what happened in the United States in 2008-2009,” DaPizio said. “Even people who can afford to buy these products are less willing to do so (in order to) not be seen as actually buying or wearing something very expensive.”

Instead, Chinese consumers are increasingly seeking “quiet luxury” style, investment pieces and “more subtle” and “less eye-catching” luxury goods, she added.

China is the world’s second largest economy with a world population of over 98,000 ultra high net worth individuals Individuals – People with a net worth of more than $30 million, second only to the United States.

However, after the epidemic, the economy has been under pressure; Expectations for slower growth and sluggish consumption.

As the country continues to grapple with high youth unemployment and troubled housing markets, some Chinese shoppers are turning back on showing off amid economic uncertainty.

Bain said in the report that although the global personal luxury goods industry is expected to grow moderately, with an increase of up to 4%, or up to US$420 billion, the Chinese luxury goods market is “struggling” and “shrinking overall.”

China’s political positioning also plays a role in the “luxury stigma” felt by Chinese consumers.

“Generally speaking, people can be subtle sometimes,” Kenneth Chow, principal at Oliver Wyman, told CNBC. “Governments have been pushing for shared prosperity, they’ve been discouraging any form of money worship. ”

Mao Zedong first proposed common prosperity in 2021, aiming to create moderate wealth for everyone.

In May, China began to severely crack down on “show off wealth” and banned several Internet celebrities, often known for their lavish lifestyles, from Chinese social media sites.

“I think it has a lot to do with the attitude of the government,” DaPizio said. She added that China’s common prosperity movement has had a psychological impact on Chinese people, as some of the country’s rich have begun moving money out of the country.

“Historically, in times of greater economic uncertainty, we’ve seen in other countries that… wealthier populations will be more hesitant to flaunt their wealth in public,” Zhou said.

“As a result… we do see that, across the board, Chinese consumers are becoming more rational,” Imke Wouters, a partner at consulting firm Oliver Wyman, told CNBC. “They really want to see “To the correlation between price and value… they just think twice before buying the most expensive (thing).”

Bain & Company’s Deng said Chinese consumers are becoming more “sophisticated.” While they used to be more willing to pay a premium for foreign brands, today many of them make purchases based on the quality of the product or the value proposition offered by the brand.