Experts have suggested that the current downward trajectory of Chinese economic growth could affect its luxury goods trade, as Chinese consumers tighten their belts. This week Ideal Wine Company asks if this could affect its luxury wine market.
The World’s Largest Growing Economy is Slowing Down
For the past decade, China has been the economic powerhouse of the world. Today it stands as the world’s second largest and largest growing economy, and it facilitates growth in emerging markets such as Latin America, through its momentous thirst for the commodities needed to fuel production. In today’s financial world, if you’re not in China, you’re not anybody worth talking about
However even China has its limitations and it might have reached them, as several factors have indicated that the country’s economy is currently slowing down. It’s GDP growth has slipped, and it is drawing out of international markets to refocus on more cost effective domestic production.
Luxuries Are Always the First Thing to Go
So the country is slowing down and in times of economic hardship what’s the first thing to go? Luxuries of course! An article on Bloomberg this week highlighted this fact, as it showed that the slowdown is threatening to end a rally for luxury companies in the People’s Republic that previously sent their shares to all-time highs.
At the time of writing, weaker Chinese spending drove down shares on several key luxury goods specific indexes; Hong Kong retail sales, Macau Gambling Revenue and the Liv-Ex 100 Fine Wine. The latter index charts the 100 most sought after wines in the world; it has dropped a staggering 32% since the high it registered in 2011. Experts have allotted this marked fall to a crackdown on the gift giving that use to typify the upper echelons of the Chinese Communist Party.
Ideal Wine Company on the Shifting Priorities of Luxury Wine
These figures just go to show the ever changing complexities of the global luxury wine trade. China is arguably the world’s largest consumer of wine and many experts, including Ideal Wine Company, have suggested that the People’s Republic may be the future of the global trade. In reality, it’s far more complicated.