Saturday, August 20, 2011

China’s newly rich are flaunting wealth — and giving Communist rulers a headache

China’s new rich love luxury products — imported French handbags, Italian sports cars — and even more, they love to show off their bling.

That seems to be creating headaches for China’s Communist rulers, who after three decades of exhorting their subjects to get rich are facing growing discontent over a widening income gap. Officials now talk about making sure wealth is more evenly distributed, and how to get the rich to tone it down.

As the global economy melts down, and China tries to accelerate its shift to a more consumer-led growth model, Beijing’s leaders see luxury items as a lucrative revenue source. Many Chinese now buy luxury products in Hong Kong or abroad to avoid China’s high taxes, so officials are debating a move to slash tariffs to encourage consumers to shop at home.

But government is loath to be seen as taking any new measures to support the sliver of the population that can afford that pricey new Hermes bag or latest Ferrari, and has delayed any decision on cutting tariffs, according to Chinese media reports and industry analysts.

“The government is facing a conflict,” said Michael Ouyang, representative of the World Luxury Association in China. “They don’t want to promote luxury because they are worried people who cannot afford it will see the advertisements. But they don’t want to limit luxury products because it’s good for the economy. So they’re facing a dilemma.”

It doesn’t help the government’s case when the rich keep showing off their bling.

Exhibit A might be a 20-year-old woman calling herself “Guo Meimei Baby.”

Guo — whose name “Meimei” means “Pretty, pretty” — became a recent Internet sensation in China, and prompted a national scandal, when she posted photos of herself on her microblog posing with her collection of imported Hermes handbags and showing off her white Maserati sports car, called “little horse,” and her (married) boyfriend’s orange Lamborghini, called “little bull.” more