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In China, to get rich is glorious nowadays
(businessweek)
Updated: 2006-01-28 09:10
Wang Zhongjun is loaded and happy to flaunt it. He wears Prada shoes, Versace
jackets, and a Piaget watch. He smokes Cohiba cigars from Cuba. He drives a
white Mercedes-Benz (DCX ) SL600, a silver BMW Z8, and a red Ferrari (FIA ) 360.
A woman walks pass an illuminated
billboard ad for French fashion house Chanel in Shanghai.
[newsphoto] | His art collection includes
hundreds of sculptures and paintings. Value: $30 million or so. Home sweet home
is a 22,000 square-foot mansion north of Beijing with antique British and French
furniture, a billiard room with bar, and an indoor pool. When he tires of
swimming, Wang can head to his stable (annual upkeep: $500,000) of 60 horses
from Ireland, France, and Kentucky.
"Entrepreneurs in China today feel much safer than before," says Wang, a
45-year-old movie producer who served in the Chinese army, studied in the U.S.,
and learned painting before backing internationally acclaimed films such as Kung
Fu Hustle. "We are more accepted by the media, government, and society today."
That's for sure. Even though Deng Xiaoping declared that getting rich is
glorious nearly three decades ago, just a few years back China's millionaires
were running scared. When a Forbes Magazine survey of China's richest appeared
in 1999, wags called it the "death list" after a tax crackdown targeted many who
made the cut and landed some in jail.
Now China is embracing them. More than 300,000 Chinese have a net worth over
$1 million, excluding property, according to Merrill Lynch & Co. (MER ). And
mainland millionaires control some $530 billion in assets, Boston Consulting
Group estimates. "There has been a revolution in attitudes toward wealth," says
Rupert Hoogewerf, who authored the 1999 list. He now runs Hurun Report, a
Shanghai-based company specializing in information about China's rich, which
just released a survey on millionaires' buying habits. "People don't appreciate
how much cash there is running around in China today," he says.
"DIZZY" OVER SHOES
Many people might not appreciate it, but luxury retailers sure do. Just five
years ago mainland buyers accounted for 1% of global sales of luxury handbags,
shoes, jewelry, perfume, and the like. Today the Chinese are the third-biggest
high-end buyers on earth, with more than 12% of world sales, Goldman, Sachs
& Co. (GS ) reckons. Within a decade, China will likely leapfrog Japan and
the U.S. to become the top luxury market, predicts Goldman analyst
Jacques-Franck Dossin. "China is experiencing huge wealth creation, and there is
lots of conspicuous consumption related to that," Dossin says. "People want to
show they are successful."
How? By buying custom clothes, diamond-encrusted watches, pricey cars,
gourmet meals, and fine wine. Zhao Hui, a chain-smoking 38-year-old
restaurateur, real estate developer, and Ferrari owner from Shanghai, says he
speaks no English, but he manages to pronounce "shopping" and "Tiffany" (TIF )
as he shows off his $50,000 Franck Muller watch. Richard Hung, a 43-year-old
manager of a pharmaceutical company, has a closet filled with dozens of Armani,
Gucci (GUCG ), and Canali suits and more than 100 pairs of Italian shoes. "I get
dizzy when I look at shoes," he says. Where to wear those duds? Try Beijing's
exclusive Chang An Club, where few blink at the $18,000 initiation fee. "Our
members can afford it," says General Manager Antonius van Gevelt, adding that
Chang An aims to keep its fees higher than rival gathering spots. The rich "want
to join the most expensive club in China," he says.
Luxury marketers are happy to serve up plenty of flash and bling to keep
sales rolling. Louis Vuitton, which has a dozen boutiques across the mainland,
in November served up 1,500 bottles of Veuve Clicquot and platters of paté de
foie gras at the celebrity-packed launch of a new Beijing store. And
fashionistas still marvel at Miuccia Prada's "skirt show" last spring, when she
took over seven stories of Shanghai's art deco Peace Hotel.
CADILLAC CAFE
Pricey wheels do pretty well, too. The Rolls-Royce outlet in Beijing is one
of the brand's top-selling dealerships. And Bentley Beijing has sold a
half-dozen 728 stretch limos -- at $1.2 million each, the world's most expensive
car -- more than any other dealership in the world. For thriftier millionaires
without an extra million to drop on transportation, Cadillac, Mercedes, or BMW
are eager to help. Shoppers at any of a dozen "Cadillac Experience Centers" in
the mainland, for instance, can relax on a black leather sofa and enjoy a glass
of Rosemount Cabernet in the "Cadillac Cafe" while browsing through photo-rich
brochures that describe the brand's 102-year history. "Our whole showroom
supports our brand: It's modern, sophisticated, and not your traditional luxury
vehicle," says Stuart J. Pierce, who oversees the Cadillac brand at Shanghai
General Motors Co. (GM ).
Now the luxury goods marketers are looking far beyond Beijing and Shanghai to
find China's millionaires. Cadillac plans to have 40 showrooms in China by the
end of 2007, and last year dispatched a 1959 El Dorado convertible on a
seven-city "heritage tour" to drum up interest nationwide. At this month's ice
festival in the frigid northern city of Harbin, watchmaker Cartier has created a
massive ice replica of its flagship Paris store. "Our aim is to have the second-
and third-tier cities become a more important part of our business," says Daniel
Chang, who oversees Cartier's sales in northern China.
Lately China's new moneyed class has gotten interested in more than fast
cars, flashy threads, and extravagant timepieces. Growing numbers of mainlanders
are snapping up everything from ancient scrolls and traditional ink paintings to
French Impressionists. Christie's International says mainland buyers account for
20% of purchases at its Hong Kong auctions, compared with virtually none five
years ago. And while most collectors prefer Chinese art, mainlanders now bid on
Renoirs, Monets, and Van Goghs in New York and London, and a Shanghai
businessman paid $1 million for a Picasso in a private sale. "There's tremendous
potential," says Ken Yeh, deputy chairman of Christie's Asia.
Even as the likes of Cartier, Christie's, and Cadillac try to separate
China's millionaires from their wealth, others aim to help them preserve it.
Although foreign banks are barred from marketing their offshore services inside
China, they are discretely wooing mainland clients via their Hong Kong offices,
figuring those who have made money abroad are fair game. And soon, banking
regulations in the mainland are to be relaxed. "In the long term, China can
surpass Japan as a major market for wealth management," says Kaven Leung, who
oversees Citigroup's private banking efforts in China.
Diamond watches. Armani suits. Silver Bentleys. Private
banks. Getting rich in today's China is indeed glorious, and spending is even
better.
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