The report, The Chinese Luxury Consumer White Paper 2012, said that there are 2.7 million high net worth individuals in China with personal assets of more than 6 million Chinese yuan ($950,000) and 63,500 ultra-high net worth individuals with assets of more than 100 million Chinese yuan ($15.8 million). The report interviewed 878 individuals with Industrial Bank private bank customers from 29 cities in China with an average personal wealth of respondents was 49 million Chinese yuan. Their annual spend was 3 per cent of personal wealth.

Six out of 10 of Chinese HNW individuals are male, with an average age of 39 years. Their main sources of wealth are returns on investment and the ownership/sale of their companies, said the Hurun report. Their main investment choices tend to be real estate, stocks and shares, however, interest in fixed income investments is gradually increasing. In addition, they own an average of three cars, four watches, take 20 days of holiday a year, with their preferred sporting activities being golf and swimming. 

Analysis of the regional distribution of HNW individuals shows that East China accounts for the highest proportion, at more than 40 per cent, whilst Beijing has the highest total number, with 460,000 individuals, 10,500 of them UHNW individuals. Guangdong province is in second place, followed by Shanghai and Zhejiang province.

Key consumer spend

Chinese HNW individuals spend an average of 3 per cent of their personal wealth a year, with travel is the biggest area of consumption, accounting for nearly a fifth of their annual spend. Next come daily luxuries, at 15 per cent and children’s education which accounts for 12 per cent.

Luxury travel is emerging as the hottest growth area in terms of spending. More than half of HNW individuals expect their expenditure on travel to increase in the future, with health and wellness and children’s education close behind at 40 per cent.

China’s HNW individuals are paying ever more interested in their health, with 73 per cent choosing to have regular check-ups, and a further tenth already having a personal physician.

Children’s education is HNW individuals’ third largest area of spending, with 85 per cent saying they have a plan to send their children abroad to study, while among UHNW individuals the figure is 90 per cent. Furthermore, a growing proportion is choosing to send their children abroad earlier.

Sixty per cent of the country’s HNWs want their private bank to provide luxury travel advice, while half want health-related value-added services, while more than a third favouring services related to their children’s education. HNW individuals are greatly interested in value-added services provided by private banking, since such services not only increase their knowledge and provide entertainment, but also offer them a chance to expand their social circle.

Gifts are one of HNW individuals’ five top areas of spending, costing them some 150,000 Chinese yuan per year – and, for UHNWs, more than 260,000 Chinese yuan. Gifts given at business occasions account for almost 80 per cent of the presents given by HNWs, while more than 40 per cent of HNWs also need to give gifts at weddings and other celebrations. Men buy more expensive gifts than women.

Education

Almost half of HNW individuals intend to take part in training programmes over the next three years, said the report. Over a third of HNW indivuduals like to attend conferences and lectures, while almost 30 per cent have taken part in EMBA programmes or further education classes for CEOs.

Among those who take part in EMBAs and CEO further education classes, more than three quarters feel that the biggest benefit they get from this is in helping to expand their Social networks. For HNW individuals below 30 years, improving their social networks (87 per cent) and educational level (45 per cent) are top priorities.

In addition, almost 60 per cent of HNWs seek to better themselves through reading. 

High quality and brand reputation

Quality is seen as the prime luxury good characteristic of luxury goods, reflective of a shift beyond seeing the luxury good as a status symbol. HNWs are not concerned about the price, and the most important factor is the product itself, followed by the purchasing environment.

HNWs’ luxury goods purchases are concentrated in watches and jewels, whereas purchases by UHNW individuals are showing a clear trend towards super-luxury goods such as yachts and private jets. Thirteen per cent of the ultra high net worth say they are going to purchase a private aircraft this year.

Hong Kong has become the undisputed first choice destination for HNW individuals to buy luxury goods or high-end consumer products. Less than 30 per cent of HNWs buy luxury goods domestically, due a lack of product safety, poor management, a lack of credibility, high prices and high taxes.

Hong Kong accounts for nearly three quarters of luxury or high-end purchases made by HNWIs, followed by those made in Europe and domestically, both at 28 per cent. On average, HNW individuals go abroad to Hong Kong to go shopping 2.9 times a year, whilst among UHNWs the frequency of such trips is markedly higher, with an average of 3.7 times a year.