THE NEW PLUTOCRACY

China is seeing the rise of a new luxury aristocracy who will shape the world for decades, says our columnist, who runs the world's premier concierge service. EMMA SHERRARD MATTHEW

When it comes to millionaires, Asia is like a new wine-growing region. Some territories, like Hong Kong and Singapore, have a well established terroir of wealthy consumers who have a smooth, fullbodied attitude to luxury and are at home with the best vintages and many are established luxury connoisseurs. Others, like China, have a terroir which is more in its infancy, where some of the rich consumers are well developed, but others are still a bit rough around the edges.

In China, the country’s new millionaires come from widely different backgrounds, with striking gaps between first-tier cities like Beijing, where wealth came from property development, investment banking and law firms, and second-tier cities where the rich are entrepreneurs and tend to be more blue-collar.

China now has almost one million US dollar millionaires, and almost 200 of those are billionaires. Ninety-seven new millionaires are made in China every day, according to Cap Gemini, which has tracked China’s booming money class for over a decade. China is now Louis Vuitton’s biggest market, a reflection of the fact that French brands are the most sought after among mainland buyers, followed by those from Italy. The leading perfume brands in China are Chanel and Dior, Cartier and Longines top the watch league, Chanel, Gucci, Hermès, Louis Vuitton and Prada now account for 50 per cent of the total spent on handbags and suitcases last year, while Armani, Hugo Boss and Burberry dominate the menswear market, where spending is presently three times greater than for womenswear.

That last point is significant. Unlike in Singapore and Hong Kong, the Chinese luxury market is still dominated by men, with many of them young, the average age of China’s millionaire class being only 36. And millionaires who have been rich for less than five years tend to have less sophisticated tastes.

“It takes time for money to mature into class and elegance,” says Daniel Jeffreys, the editor-inchief of Quintessentially Asia magazine. “There is a new group emerging in China that I call the Hanistocracy. These are multi-millionaire members of the Han ethnic majority and they are developing what people in the west might call “aristocratic habits”. They play polo or own a polo team, they buy less “obvious” luxury brands like Bottega Veneta and they having gone beyond buying wine to wanting to buy vineyards.”

In Hong Kong there are now over 100,000 high net worth individuals, while Singapore has over 75,000, and they have many of the characteristics that China’s “Hanistocrats” aspire to, including long-term wealth, frequent international enjoying strong demand.

If we take wine as an example, we often receive extraordinary requests for the most expensive vintages from mainland Quintessentially members, and it’s apparent that a high price tag and high quality are often seen as the same thing. By comparison, Hong Kong members are much less sensitive to price and focus a lot more on the product itself.

The four most coveted brands in Hong Kong, according to a KPMG study, are Louis Vuitton, Gucci, Burberry and Prada. But it’s worth noting that the average price per transaction in Louis Vuitton stores in Hong Kong (excluding tax) is over 30 per cent higher than in Louis Vuitton stores on the mainland, suggesting that Hong Kong’s luxury consumers are buying at the more expensive and exclusive end of the Louis Vuitton range.

In September, Louis Vuitton will open its first Maison in Singapore, the first in South East Asia and only the twelfth in the world. The event underpins Singapore’s growing importance as a centre for luxury spending, with the Singaporean economy rebounding extremely fast from the 2008 economic crisis and with consumption buoyed by the opening of the 81,750 sq m Marina Bay Sands luxury shopping mall. If bags and baubles reign in Beijing, while wine and wristwatches dominate in Hong Kong, it’s high-tech luxury that has seen the fastest growth in Singapore. In the second quarter of 2011, sales of smart phones, luxury watches and high definition televisions all rose by 25 per cent, while the number of people with net worth of at least US$5 million grew by over 30 per cent.

Although spending patterns may differ between China, Hong Kong and Singapore, habits are developing rapidly. And there is one common factor: spending on luxury will continue to rise at an eye-popping rate in all three regions for several years to come.

Emma Sherrard Matthew is the Kong Kong based Chief Executive of Quintessentially. quintessentially.com