Pandemic paralyzes profitable black luxury goods market in China - Plataforma Media

Pandemic paralyzes profitable black luxury goods market in China

“The deal is over,” the 31-year-old Chinese resident in Beijing explains to Lusa, referring to his frequent trips to Europe to purchase products for resale in China, by far the largest market in the world for luxury brands.

His last trip was last February, when he visited France, the Netherlands and Luxembourg, where he brought Louis Vuitton bags, Rolex watches and Dior cosmetics, among other brands appreciated by Chinese consumers. “It was just buying and buying,” recalls Yang Yang of the eight-day trip across the Old Continent.

At the time, China was at the peak of the outbreak of the new coronavirus, which started in the Chinese city of Wuhan, but, unlike many Asian countries or the United States, travelers from the country continued to be allowed, without quarantine or screening in the Schengen Area.

As Europe became the center of the pandemic, however, the Chinese government imposed quarantine measures on visitors from the continent and reduced air connections, while European countries banned entry to non-residents.

Yang Yang, who used to earn, on average, more than 5,000 euros on each trip to Europe, already discounted travel and hotel expenses, now spends his days at home.

“I’m getting fat,” admits the young Chinese man, who has a monthly payment of 10,000 yuan (1,300 euros) to pay the bank in mortgage and car loans. “There is nothing I can do,” he admits.

“Daigou ‘(purchasing agency, in Chinese) is a black market estimated at billions of euros and, according to Chinese estimates, employs one million people in the country.

The activity started with a public health scandal in 2008, when the adulteration of infant milk with melanin by 22 local brands resulted in the death of six babies and 300,000 intoxications in China.

Tourists and members of the Chinese diaspora then began buying large quantities of baby milk in Europe, Australia and the United States, or in the semi-autonomous regions of Macau and Hong Kong, for resale in China, leading some countries to impose a purchase limit of two cans per customer, to avoid shortages in their domestic markets.

“The Chinese do not trust products purchased in China,” notes Yang Yang, while consulting Wechat, a Chinese application that works simultaneously as a social network and digital wallet, allowing him to advertise his products and make transactions.

In recent years, the business has expanded, supported by the Value Added Tax exemption regime for non-residents in the European Union, which allows the Chinese to buy without tax and resell in China, a country that accounts for one third of the range consumption high in the world.

Imported luxury goods cost, on average, 50% more in China than in Europe, due to taxes.

The multiplication of e-commerce platforms and live video transmission and digital wallets further streamlined contact and transactions between agents and buyers in China, by enabling anyone to open virtual stores and broadcast live tours of the main streets and shopping centers in China. Europe.

Saving habits associated with previous generations have also disappeared in the country, as ‘millennials’ emerge as avid consumers and often willing to spend beyond their means.

A survey by the British bank HSBC reveals that the debt-to-income ratio in China’s post-1990s generation amounts to 1,850%, with the average debt amount of consumers of this age group to a variety of lending institutions being higher, on average, than the equivalent of 16,000 euros.

“The Chinese are now looking for VIP products,” explains Yang Yang. “And if a brand is bought in the European Union, it means that it complies with the highest quality standards”, he says.

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