Wally Edgar Chevrolet - Detroit Chevrolet Dealers -They do it in CHINA TOO?

Why is China's luxury market so hot? More and more Millionaires
 
 
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April 28, 2011 - PRLog -- SHANGHAI -- At this year's Shanghai auto show site, you had to queue up for an hour to enter the hall dedicated to luxury and superluxury brands.

But after the first day of the show, even if you got in, there was no way you could buy anything because orders had been placed for all the limos and sports cars on display.

What's behind this luxury-vehicle craze in China? One easy answer is the large number of rich Chinese these days. But that doesn't tell the whole story.

The truth is, there are far more rich people in China than government statisticians know about. And one should never ignore the enormous purchasing power of government officials.

Even today, most businessmen in China prefer to conduct business transactions in cash. This is partly due to the nation's high savings rate; Chinese people save about half of their income in bank deposits.

And China lacks effective rules to force citizens to report income, which is why tax evasion by private businesses is rampant. As a result, the government doesn't know how many millionaires and billionaires live in China.

Thanks to Forbes magazine, we have an idea about that number. According to Forbes' latest statistics, 383,000 people in China had assets worth more than 10 million yuan ($1.5 million) last year.

But even that estimate may be too conservative, according to Rupert Hoogewerf, a Scot who has set up a Shanghai consulting business that tracks the fortunes of wealthy Chinese.

Hoogewerf calculates that one of every 1,400 Chinese citizens has more than 10 million yuan in assets. If Hoogewerf is correct, China should have 1 million people with assets exceeding 10 million yuan.

Those wealthy Chinese are prime customers for luxury vehicles. But there's another group of luxury car lovers -- Chinese bureaucrats. With no effective system to control public spending, government officials can spend as much as they see fit.

Government fleets

And a huge amount of money has been spent on vehicle procurement. Detailed figures are unavailable, but it is estimated that China's governments at all levels spend as much as 200 billion yuan annually on vehicle purchases and maintenance.

And when Chinese bureaucrats buy cars, they have a decided preference for German luxury brands.

Earlier this year, Chinese media reported that a middle-level government official in northeast China's Liaoning province loved the Mercedes-Benz S500 so much that she used a bribe she had taken to buy one.

But she dared not drive the sedan for fear that she would be discovered. So she was satisfied to simply look at the sedan parked in her home's garage.

Beijing has tried to curb rampant government spending on vehicle procurements, but to no avail.

In January, the Southern Metropolis Daily reported that the government of Ningxia in China's impoverished northwest region bought 25 Audi A6 luxury sedans in one purchase.

Source: Auto News China

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