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August 25, 2009

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Rich pay more for the luxe life

THOUGH it's doubtful that anyone will feel sorry for the rich, a new report shows that the wealthy are having a comparatively tougher time than everyone else when it comes to prices.

While the Consumer Price Index for general goods has been falling, the CPI for luxury products is on the rise, thanks to the climbing costs of elite education, liquor, jewelry and other swank stuff.

The general CPI dropped 1.7 percent in the year ending June 1, while the luxury CPI rose 4.6 percent, according to the "Hurun Luxury Living Index Report" for 2009.

The index tracks the prices of 59 luxury consumer goods and services including high-end homes, cars, jewelry and watches.

Over the past three years, it showed that the growth pace of prices for luxury items was 1.2 times faster than the general CPI, although the trend has slowed a bit lately. This year's index is down from last year's 12.6 gain.

"Despite the slower pace, the price of luxury products went up steadily as a result of inflation," said Rupert Hoogewerf, chairman and chief researcher of the Hurun Report magazine, which is known for its annual "China Rich List" ranking the country's wealthiest people.

The price gains for business school, liquor and cigars contributed greatly to this year's growth.

Tuition for master of business administration programs rose an average 9.5 percent. The cost of attending an executive MBA program at Beijing-based Cheung Kong Graduate School of Business surged 30 percent a year to 530,000 yuan (US$77,578), for instance.

The 10 luxury cigars and liquors surveyed recorded an average price increase of 10 percent as a result of higher import taxes. Among them, the price of Hennessy Richard Cognac jumped as much as 21 percent to 24,200 yuan a bottle.

Watches, jewelry and skin-care products experienced smaller percentage price gains.

"The ongoing financial crisis pushed luxury brands to slow their price increases or even cut prices to lure more customers in a bid to maintain market share," the report said.

The Hurun Research Institute earlier released a related study, "China's New Aristocrat Consumption Threshold Report," which showed annual spending required to remain in the upper economic stratum had risen.

The spending threshold for Shanghai's wealthy - people who hold more than 100 million yuan in assets - rose to 83.97 million yuan (US$12.3 million) this year, compared with US$12.1 million in 2008 and US$5.5 million in 2007 in China. The report did not break down spending by cities in the other two years.

"The capital required to join the Chinese upper class is increasing every year, due to price inflation of luxury goods and their limited supply," Hoogewerf said.


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