Coal-rich province cuts back on luxury as graft crackdown bites
Print Edition
The upcoming Lunar New Year is not making life for luxury retailers in north China’s Shanxi Province any easier as sales continue to drop amid the ongoing anti-corruption campaign.
“In the past, wearing top brands at work attracted admiration. Now it invites suspicion over corruption, so everybody is being low-key these days,” a local official surnamed Gao said.
Many officials have become cautious over what they wear in the coal-rich province, where more than 15,000 party cadres and government officials were investigated for disciplinary violation last year.
Corruption and bribery are seen as driving unsustainable growth for China’s luxury market, where expensive watches, bags and clothes are given as gifts in exchange for business favors.
Gao wears a wristwatch to work, but his is a souvenir from a work conference. Luxury brands are now off-limits for officials.
In 2013, Yang Dacai, former head of the work safety administration in neighboring Shaanxi Province, was sentenced to 14 years in prison after pleading guilty to taking bribes and having property he could not account for.
His corruption was exposed after pictures of him wearing expensive watches raised questions over how he could afford them.
In Taiyuan, capital of Shanxi, the downtown shopping district, with its Louis Vuitton, Gucci, D&G and Hermes stores, among others, is experiencing dwindling customer numbers in the run-up to the Lunar New Year.
Coal mine bosses and government officials have long been customers for luxury brands.
Facing a slump in sales, retailers have ramped up promotion efforts. But still sales shrink.
The growth of the luxury goods market on the Chinese mainland has already weakened, with the market down 1 percent to 115 billion yuan (US$18.4 billion) last year, the first decline after eight years of growth, according to consulting firm Bain & Company.
Guo Xinping, a sociology professor at Shanxi University, says the anti-corruption drive is a real game changer for the province.
“For a while, career success is measured, to some extent, by what you wear, but then the anti-corruption campaign kicked in and effectively curbed official excess.”
The luxury industry will not crumble in China, Guo said, but its growth will moderate after years of unsustainable growth fueled by corruption and bribery.
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