Beijing’s communist government, faced with a widening gap between rich and poor, moved to make the issue less visible by banning outdoor advertising that promotes lavish lifestyles in the Chinese capital.
Promoting “hedonism, lavishness and the worship of foreign things” on outdoor advertisements such as billboards will be prohibited in Beijing by April 15, the city’s Administration for Industry and Commerce said in a statement on its Website. Ads that are in “poor taste,” contain vulgar language and advocate “aristocratic lifestyles” will also be banned.
China, home to 150 million people who live on less than $1 a day, may surpass Japan to become the biggest luxury goods market by 2015, Commerce Minister Chen Deming said March 7. Premier Wen Jiabao last month pledged to narrow the wealth gap as online postings called for “jasmine” protest rallies.
“The gap between rich and poor, and conspicuous consumption have come up in the minds of the leadership,” said Joseph Cheng, professor of political science at City University of Hong Kong. “This is probably a response in the context of maintaining stability to minimize causes for general dissatisfaction.”
Inflation, Wealth Gap
China’s economy grew 9.8 percent in the fourth-quarter from a year earlier while consumer prices climbed 4.9 percent in February, topping the government’s 2011 inflation target of 4 percent.
China’s Gini coefficient, which tracks income distribution, has climbed to almost 0.5 from less than 0.3 a quarter century earlier, indicating the wealth gap is widening, according to Li Shi, professor at the School of Economics and Business at Beijing Normal University.
Sales of luxury items in China may more than double in five years to 180 billion yuan ($27 billion) in 2015, as demand increases for brands such as Louis Vuitton, Hermes and Prada, McKinsey & Co. wrote in a March 8 report.
LVMH Moet Hennessy Louis Vuitton SA (MC) and Hermes International (RMS) SCA are among luxury goods makers expanding in China as it overtook Japan to become the world’s second-largest economy last year. Italian fashion house Prada SpA, whose products include Miu Miu bags, plans to be the first company from that country to list in Hong Kong as China’s rising incomes spur demand for luxury goods.
Ferrari SpA, the Italian sports-car maker, posted unit sales growth of almost 50 percent in China last year, while sales at Volkswagen AG’s Lamborghini division tripled.
“Unequal income distribution is a big issue here and is something the government does take very seriously,” said Ben Cavender, an analyst at China Market Research Group in Shanghai, which estimates luxury goods sales will grow an average of 20 percent annually in China over the next five years. “Consumers are going to keep buying, they’re hungry for these brands.”
--Tim Culpan, Regina Tan, Editors: Frank Longid, Chua Kong Ho.
To contact Bloomberg News staff for this story: Regina Tan in Beijing at +86-10-6649-7547 or firstname.lastname@example.org
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