Chinese taste for luxury goods and high-end travel is set to rocket to 44 per cent of the global total within just eight years, according to a new survey.

A burgeoning middle class with a penchant for expensive goods will push China's slice of global sales from 15 per cent currently, to nearly half by 2020, worth an estimated €74 billion ($99 billion) according to brokerage and investment group CLSA Asia-Pacific Markets.

The report, entitled Dipped in Gold: Luxury lifestyles in China and Hong Kong, published by regional head of consumer research Aaron Fischer this month, showed that the Communist country is transitioning from a saving to a spending culture.

A previous CLSA survey of 340 consumers and 31 luxury store managers in China’s tier 1-3 cities, found that more than half have made or are planning a luxury purchase. Those who bought luxury goods in the past 12 months spent an average 10-12 per cent of their total household income on these items, demonstrating a high propensity to spend.

An opportunity of a lifetime

Luxury goods companies are expanding rapidly in China to accommodate demand that will account for half of their forecasted global growth in the next 10 years. 

Handbags, leather goods, watches and jewellery are expected to see the fastest growth. Louis Vuitton’s biggest customers are already Chinese buyers, while Greater China represents 28 per cent of sales for Swatch, 22 per cent for Richemont, 18 per cent for Gucci, 14 per cent for Bulgari and 11 per cent for Hermes.

"Younger and richer than their foreign counterparts, Chinese consumers enjoy displaying their wealth and success and are not just spending on themselves but also purchasing gifts for friends and family," said Fischer. But firms must take into account several important differences between Western and Eastern spenders, he added. 

Culture divide

For example, mainland Chinese millionaires are 15 years younger than their overseas peers. The number of individuals with more than Rmb1,000 million has increased at an annual rate of 50 per cent from 24 in 2000 to 1,363 in 2010. 

Also, success, wealth and fame/social standing are highly regarded in Chinese culture and displaying this through watches, jewellery, apparel, cars and wine garner respect. As is being treated like a VIP; wealthy Chinese expect to be acknowledged through personalised service and products, said the report. 

Conversely, the luxury market in China is still largely male-dominated given workforce demographics and the culture of gift giving for business purposes. CLSA estimates nearly a fifth of Chinese consumers buy luxury goods as gifts with luxury handbags, clothing, watches and jewellery the most popular items. This is particularly popular around important Lunar holidays like the Chinese New Year in early February.

"As the Chinese consumer become wealthier they are starting to travel and overseas purchases provide a cache that domestic consumption is yet to replicate," said Fischer. They are also willing to pay a premium, a trend noticeable in the wine sector where fine wine prices increased 40 per cent during 2010.