Report: China to be Top Luxury Buyer by 2020

China is poised to become the world’s largest market for luxury goods by 2020, according to a new report from investment research group CLSA Asia-Pacific Markets. With fatter paychecks and stronger desires to display new wealth, Chinese consumers are building their appetites for designer handbags, watches, and clothing. They’re pushing up profits for high-end retailers, such as Louis Vuitton and Hermes, and are expected to carve out in the next decade a €74 billion, or roughly $101 billion, luxury market by the end of this decade, the report said. To put that in perspective, that’s €24 billion more than what U.S. consumers, who still lead high-end purchases, spent on luxury last year, according to CLSA. It also exceeds last year’s spending in Japan, long known as the world’s main driver of growth in luxury consumption, by more than €50 billion. By 2020, the luxury market worldwide should be worth €385 billion, CSLA says, meaning China would represent nearly twenty percent of the global total. Those numbers help explain why the world’s designers are all flocking from their homelands to put on big fashion shows for China’s rich and famous. So what is it about China that’s driving the boom? One answer, of course, is decades of strong economic growth, which has produced a whole new horde of newly-minted millionaires. The number of Chinese who have built assets of one billion yuan, reached 1,363 last year and that number has exploded since 2000, increasing at an annual rate of 50% to 58%, CLSA says citing the Hurun Research Institute. Appearing ostentatious isn’t a faux pas in China, it’s often the goal. Cash-heavy consumers are eager to appear flashy and are willing to pay premium prices to catch second glances. It’s not uncommon for businessmen to pay 30,000 yuan, or $4,575, for a bottle of wine, the report said. Last October, three bottles of Chateau Lafite’s Rothschild 1869 vintage wine sold at a Sotheby’s auction in Hong Kong each pulled in more than $230,000. Unlike any other luxury market, China’s biggest buyers are men. They’re gobbling up big-ticket items such as watches and leather goods and are giving extravagant gifts to colleagues and business partners. CLSA estimates that 16-17% of Chinese consumers, including women, buy luxury goods as gifts. And it’s not just retailers with shops in China who stand to benefit from the country’s for Hermes and company. More high-end Chinese shoppers are heading overseas, where luxury products are cheaper, spurring more splurge and impulse buys. The uptick in travel is playing out even this Chinese New Year, a time when most families stay close to home. U.K. newspaper the Guardian notes that this year, many Chinese have celebrated the holiday by setting out on luxury shopping sprees overseas. The new frame of mind: Who needs dumplings and fireworks in Beijing when you can have Burberry and Chanel in London?