Temat: Hurun Report China Luxury Living Index

Hurun Report China Luxury Living Index

COST OF LUXURY PRODUCTS RISE BY 8.7%, TWICE AS FAST AS CPI

US$5 MILLION REQUIRED FOR MEMBERSHIP TO NEW ‘UPPER CLASS’.
150,000 INDIVIDUALS CAN AFFORD THAT.


Hurun Report China Luxury Living Index
Shanghai, August 15, 2007. Hurun Report China Luxury Living Index rose by 8.74% over the past year, more than double the consumer price index. Tracking the rise in costs of a basket of luxury products in China, the price hike of the China Luxury Living Index was led by increases in luxury residential, golf memberships and executive education.

Whilst the overall consumer price index climbed 3.5% since the beginning of the year, Hurun Report's index of 32 luxury goods climbed on average 8.74%, showing that price inflation for luxury products in China is considerably stronger than that of everyday products.

The hike in the cost of luxury items in China is driven by the growing number of wealthy individuals, a gift-giving culture and the important matter of ‘face’. Whilst part of the increase may be associated with last April’s luxury tax of between 10% and 20% levied on certain luxury imports, it also reflects the desire of luxury brands to keep their products differentiated. The hike comes despite the 4.5% rise in the value of the renminbi, making imported goods cheaper.

What went up? A 372sqm villa in Shanghai rose by 18.6% to RMB 19m, a golf membership at the premium Sheshan Golf Resort by 25% to RMB 1.6m, an Executive MBA at Tsinghua University by 16% to RMB 290,000, a Patek Philippe Nautilus by 6.5% to RMB 234,700 and a Rolex Oyster by 4.37% to RMB 79,960.

Drinks and smokes remained largely unchanged. A bottle of Swellfun ‘baijiu’ maintained its price of RMB 2,080 whilst a packet of Panda cigarettes was still RMB 180, although a bottle of Louis XIII cognac rose by 12%.

Several items in Hurun Report China Luxury Living Index declined in price, mainly on the back of the renminbi rise. For example, the average cost of a luxury trip overseas was down by 4.5% compared with the previous year.

Hurun Report China Luxury Living Index is calculated using a basket of 32 products and services typically reserved for China’s wealthiest individuals, including golf memberships, Rolls-Royces and luxury watches. This is the first year for Hurun Report to produce the China Luxury Living Index.


APPENDIX 1 – Hurun Report China Luxury Living Index
　
　 　 Price Change * Market price **
　 Automobiles and Yachts
1 Rolls-Royce Phantom EWB 9.55% 6,880,000
2 Mercedes-Benz S500L 1.03% 1,768,000
3 BMW Z4 3.0si 8.33% 650,000
4 Ferretti Yachts 630 4.55% 34,500,000
　
　 Watches, Jewelry & Writing Instruments 　
5 Patek Philippe Nautilus 5712/1A 6.49% 234,700
6 Rolex Oyster Perpetual Datejust 116233 4.37% 79,960
7 Buben & Zōrweg Time Mover ® Evolution 4 16.47% 39,600
8 Cartier Love Bracelet 1.95% 31,400
9 Montblanc Meisterstueck 149 Fountain Pen 3.40% 6,090
　
　 Accessories & Skin Care 　
10 Louis Vuitton Speedy Bag 5.56% 5,700
11 Chanel A01112 Bag 8.43% 19,300
12 Hermes 90cm Scarf 1.05% 2,880
13 Vertu Signature Series 31.58% 250,000
14 Lancôme Secret de la Vie 50ml 0% 2,980
　 　 　 　
　 Luxury residential & Interiors 　 　
15 Shanghai Shimao Sheshan Villa (700㎡) 12.50% 31,500,000
16 Shanghai Tomson Golf Villa (372㎡) 18.60% 18,972,000
17 Beijing Cathay View Courtyard Residences (228㎡) 24.44% 6,384,000
18 Da Vinci Leather Double Sofa 10.29% 300,000
19 Steinway Concert Grand D 3.70% 1,400,000
　
　 Drinks & Smokes 　
20 Louis XIII bottle 12.24% 11,000
21 Swellfun bottle 0% 2,080
22 Pu'er Tea aged for 30 years 33.33% 20,000
23 Davidoff Cigar No.2 0% 3,500
24 Panda Cigarettes 0% 180
　
　 Business Jets & Clubs
25 Private Jet 800XP Rental fee per hour 0% 25,000
26 Mission Hills Golf Club Diamond Membership 4.63% 1,130,000
27 Sheshan Golf Club Membership 25.00% 1,600,000
28 Chang'an Club Membership 　 166,000
　
　 Education 　
29 Tsinghua University EMBA 16.00% 290,000
30 Harvard University's tuition fee of Master degree for kids 24.28% 388,561
　
　 Luxury Travel 　
31 Lijiang Banyan Tree (Deluxe Pool Villa) 3 nights -3.74% 27,867
32 Peninsula Hong Kong (Superior Harbour View Suite) 3 nights -4.41% 26,695

* Percentage price increase from 28 Feb 2006 to 28 Feb 2007
** Market price at 28 Feb 2007


US$5 million required to join new Chinese ‘Upper Class’
150,000 Chinese individuals now have private wealth of US$5 million, forming a new ‘upper class’ of Chinese society. The price of membership? US$5 million.

Of the US$5 million required, half of that goes on the villa tucked into a prestigious compound. Next comes decorating and here a Wu Guanzhong, one of the best-known Chinese contemporary painters, on the wall seems to be a must-have and costs RMB 2.9 million. We added in a UBS private bank account, on the grounds of the fast expansion of private banking in China, and also for that undeniable status effect. Your business car is likely to be a Mercedes-Benz S600 at RMB 1.8 million. Your golf membership is probably at Mission Hills in Shenzhen which comes at the cost of RMB 1.1 million. Your annual spend, which only accounts for 4.4% of the US$5 million.

Table: Size of Market – Number of Wealthy Individuals in China
　
Personal wealth # of individuals
US$1m 500,000
US$5m (new aristocracy) 150,000
US$10m 35,000
US$100m 2,000
US$1 billion 50

Source: 2007 Hurun Report research




APPENDIX 2 – List of Items Required for Membership to New ‘Upper Class’
Category Product/Service Cost RMB Percentage of total spend
Luxury Residential Shanghai Tomson Golf Villa (372㎡) 18,972,000 49.59%
Painting Wu Guanzhong Painting 2,900,000 7.58%
Home Theatre Bose home theatre system 48,800 0.13%
Furniture Da Vinci Leather Double Sofa 300,000 0.78%
Piano Steinway Concert Grand D 1,400,000 3.66%
Automobile Business Car －Mercedes-Benz S500L 1,768,000 4.62%
Automobile Self-drive Car －BMW Z4 3.0si 650,000 1.70%
Watch Patek Philippe Nautilus 5712/1A 234,700 0.61%
Jewelry Cartier Love Bracelet 31,400 0.08%
Education Tsinghua University Executive MBA 290,000 0.76%
Education Harvard University Masters Degree 388,561 1.02%
Golf Club Mission Hills Golf Club Diamond Membership 1,130,000 2.95%
Private Club Chang'an Club Membership 166,000 0.43%
Private Club Yongfoo Elite Membership 20,000 0.05%
Financial Services UBS Private Bank minimum deposit required 7,740,900 20.23%
Financial Services CMB Personal Financial Services minimum deposit required 500,000 1.31%
Writing Instrument Montblanc Meisterstueck 149 Fountain Pen 6,090 0.02%
　
Annual Spend 　 　 4.40%
Fashion Giorgio Armani - 2 suits a year 38,000 　
Fashion Chanel - 2 suits a year 90,000 　
Fashion Hermes - 2 scarves a year 5,760 　
Fashion Louis Vuitton Speedy Bag 5,700 　
Fashion Chanel A01112 Bag 19,300 　
Skin Care LA MER (Cream 60ml) - 3 bottles a year 6,900 　
Skin Care Lancôme (Secret de la Vie 50ml) - 2 bottles a year 5,960 　
KTV The Rainbow Room (Shanghai) - 5 times a year 50,000 　
Laptop Thinkpad Laptop T43p 2668Q2C 33,500 　
Mobile Phone Vertu Signature Series 250,000 　
PDA Dopod PDA 858 6,680 　
Educating kids Cost of educating kid in US. for one year 480,000 　
Luxury Travel Air France business class return with seven nights at the Ritz Paris 79,168 　
Luxury Travel Private Jet 800XP 3 hours rental 75,000 　
Luxury Travel Yalong Bay Villas & Spa Resort (Golf / Lake View Villa) 3 nights 31,800 　
Luxury Travel Lijiang Banyan Tree (Deluxe Pool Villa) 3 nights 27,867 　
Luxury Travel Peninsula Hong Kong (Superior Harbour View Suite) 3 nights 26,695 　
Luxury Travel Pudong Shangri-la Hotel (Executive Room River View) 2 nights 9,085 　
Drinks Cognac, Chinese ‘Baijiu’ & Champagne (Louis XIII, Chivas, Moutai, Swellfun, Wuliangye & Veuve Clicquot) 110,970 　
Tea Pu'er Tea aged for 30 years - 1000g a year 20,000 　
Cigarette Panda Cigarettes - 280 packages a year 50,400 　
Cigar Davidoff Cigar (No.2 ) - 2 boxes a year 7,000 　
Dining Shanghai South Beauty – dining 10 times a year 15,000 　
Dining Shanghai Tanfu Cuisine (Treat ) – dining 10 times a year 120,000 　
Dining Shanghai Sens & Bund – dining 20 times one year 32,320 　
Dining Beijing First Star – dining 15 times a year 7,500 　
Pets Tibetan Mastiff Dog 80,000 　
TOTAL 　 38,257,856 100%

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