Scale models of villas.

An Rmb4 million piece of Hetian jade, an Rmb9.99 million Aurora diamond pen, an Rmb40 million Italian yacht, an Rmb130 million island villa - these were all up for sale at Wenzhou, even during a tough economic downturn.

"We can only host a show like this in Wenzhou because we have confidence in the Wenzhou market," said Chen Mingdong, Project Director for the Wenzhou International Luxury Exposition, 2009.

A new survey suggests that Wenzhou citizens recognise some 69 luxury brands on average, reflecting the maturity of the city's luxury goods sector.

The Exposition has become the top consumer exhibition in Wenzhou, maybe even in the whole of China. The show featured luxury goods worth Rmb1.2 billion. The two previous shows also performed well, with the 2007 event grossing Rmb80 million worth of on-site deals. Last year's Exposition grossed Rmb120 million.

It showed Wenzhou people opening their purses. According to KPMG's latest report, China's Luxury Consumers, the cities of Shanghai, Guangzhou, Shenzhen, Beijing and Wenzhou have residents with per capita incomes of over US$7,000.

An expensive limited-edition sports car.

These cities are undoubtedly set to become China's major luxury goods markets.

Wenzhou is particularly rich in private capital, with over 2.5 million commercial business owners and 580,000 overseas-based Chinese, amid a population of 7.8 million. One-tenth of the BMWs, Mercedes and other auto brands in China are owned by Wenzhou people. The city also has the highest car ownership rate in the country.

According to a survey recently published by McKinsey, the number of well-off Chinese families with an annual household income of over Rmb250,000 reached 1.6 million in 2008 and is growing at a rate of 16%.

The number is expected to exceed 4 million by 2015, by which time China will be a country with the fourth largest number of well-off families in the world after the US, Japan and the UK.

A precious handbag.

This is set to translate into huge spending power. China's total consumption of luxury goods amounted to US$8.6 billion by January this year, accounting for 25% of the world total and overtaking the US for the first time to become the world's second largest luxury consumer.

Indeed, the world's top three consumers of luxury goods today are Japan, China and the US.

Global high-end brands under one roof

This year's Exposition was jointly organised by the World Luxury Association, the Wenzhou General Chamber of Commerce and the China Win-Win Group Limited.

The guests all came from the top of their respective fields, such as property owners, members of exclusive clubs, social celebrities and entrepreneurs.

The Third Wenzhou International Luxury Exposition.

Imported wines.

The organisers invited guests to try out the merchandise for themselves. These ranged from driving luxury cars to enjoying fine foods and appreciating music, all through the prism of a luxury lifestyle.

Due to limited booth space, only the top names in each field were invited to the Exposition.

They included Riva and AZIMUT yachts, Rolls-Royce (Phantom LWB and Coupé), Ferraris (F430 and F599), Maserati (Quattroporte), Lamborghini, Aston Martin, Wiesmann, HEKU caravans, Italian KM leather bags and Mont Blanc collectible pens and watches.

Expensive pipes.

There were also Dunhill cigarette accessories, Mingjia pipes, Cohiba limited-edition cigars from Cuba, Qinghai Chuntian's top grade cordyceps, Segway personal transporters, HSTC Private Jeweller, Raymond Weil watches from France and Guan Ware porcelain dating back to the Southern Song Dynasty.

Jade and jewellery were the best-selling items, with Rmb22 million worth of goods changing hands. This was followed by real estate with a transaction value of Rmb40 million.

An island villa with a price tag of Rmb130 million was the centre of attention. The villa is on Sanpan Island in Dongtou, Wenzhou, and has its own private pier, tennis courts and function rooms.

Real estate transactions over Rmb40 million in value.

"Jade and real estate have something in common. They can both be kept for a long time and may be used as good hedges against inflation," said one dealer.

Chinese people's concept of luxury consumption has subtly changed in tandem with the financial crisis. "When the economy was good, people loved to buy luxury items to show their wealth. When the economy is bad, they will buy things which are good hedges against inflation and which allow them to show off without losing money," said an attendee.

The economic situation is making people more cautious when they buy luxury goods. More compare brands and products and look into the stories and histories behind the brand names before making their purchases.

Industry players see new opportunities as the market for luxury goods expands in China.

Rich, youthful consumers

Diamond pen priced at Rmb9.99 million.

The McKinsey report noted that in addition to strong purchasing power, youth is another striking characteristic of China's well-to-do consumers.

At present, the average age of well-to-do consumers in China is some 20 years younger than those in the US and Japan, with people under 45 accounting for 80% of the total. This is good news for luxury dealers.

Becoming rich at a younger age is also very much a characteristic in Wenzhou.

At the exhibition, the average age of people buying luxury goods was between 25 and 35. Second generation tycoons are the targeted consumers and their spending habits are very different from those of their seniors who started from scratch.

Young people are fashionable which makes traditional luxury items less popular. Compared to previous events, sales of watches and chinaware dropped by at least 20%.

Interior of a deluxe caravan.

Taking their place were top cars and other items. Transactions involving Ferraris, HEKU and other brand-name cars exceeded Rmb13 million. Sales of top cigars and Swiss pipes with price tags of Rmb270,000 also soared.

"Considering the financial crisis and the consumption habits of second generation tycoons, we will make the necessary adjustments in our next show. We will bring in luxury items that are not particularly expensive but have heavy consumption. We also plan to introduce a dozen or so top European brands that have not yet entered the China market," said Chen, the Exposition organiser.

The organiser also intended to eliminate some conventional luxury items and replace them with more novel ones.

Indigenous products entering international market

At this year's show, most of the items that drew crowds had foreign trademarks. It was embarrassing that hardly any local luxury goods were on display.

But Guan ware dated back to the Southern Song Dynasty, while top-class cordyceps from Qinghai was on view. According to Chen, gift boxes were selling at Rmb12,000 each. Total transactions exceeded Rmb1 million.

Hetian jade pieces worth Rmb4 million.

Chinese products indeed need to establish brand assets. The country has the products but lacks the ability to build luxury brands.

In the marketing of silk and porcelain, "Made in China" is synonymous with the mystery of the Orient and the finest craftsmanship. "Chinese businessmen should make the best of these brand assets, which will give China a valuable edge in the sale of Chinese luxury goods worldwide," Chen commented.

However, China can't escape the financial crisis unscathed.

Wenzhou people appropriately lowered their requirements and targeted second- and third-line luxury goods in this year's Exposition.

Although the number of visitors increased by nearly 50% this year, value transactions dropped by Rmb20 million, meaning that luxury has taken on a new meaning, even among the very rich.

from special correspondents Chai Yanfei and
Zhao Yejiao, Zhejiang