More than 1.4 billion people in China celebrate Chinese New Year - or the Spring Festival - which this time began on 10 February. Chinese New Year, the most important of the holidays in the Celestial Empire, is celebrated all over the country for two weeks and happens to be the main occasion of the year to give gifts symbolizing good luck and fortune - gold, jewelry and souvenirs. This year, the Spring Festival coincided with Valentine's Day on February 14, thus giving an added impetus to jewelry retail to boost sales.
According to the statistics released by China’s Ministry of Commerce, jewelry sales in the holiday period jumped 38.1%, while last year the growth was much more modest - 16.4%. However, total retail sales in the official festive week slowed 1.5% from the year earlier to 14.7%. Total New Year sales reached almost 540 billion yuan ($ 86 billion), according to Bloomberg citing official data.
While analyzing sales in the Chinese New Year it is important to look back at what they were in the course of several months prior to the holiday period. The Hong Kong Retail Management Association giving an overview of 2012 compared it with a “bumpy” ride: retail sales in Hong Kong, the main shopping Mecca for China and the whole of Asia, went down from double-digit growth early in the year to 3.9 % in July 2012. But the market was up again in December and sales rose 8.8%. The retail sector bounced back in anticipation of sustained growth during the holiday shopping period.
“The challenging market environment experienced in the three quarters ended September 30, 2012 has started to show early signs of recovery in the quarter ended December 31, 2012,” Yu-Chuan Yih, Chairman and Chief Executive Officer of LJ International, which owns the ENZO network accounting for over 250 stores, told Rough&Polished.
However, January did not see any upturn in business. The table below (courtesy of Forbes) shows that jewelry sales last January were 6.7% lower compared with one year ago, whereas sales in January 2010 jumped by more than 10%.
It seems that the reason for the decline is not so much economic as political. Last November, after Xi Jinping came to power as the new head of the Central Committee of the Communist Party of China, an aggressive purge started within the Chinese government aimed at officials mired in corruption. The new chairman of China declared war on bribery and corruption. Members of the Chinese government have since turned flat-out eager to avoid wasteful spending and luxury purchases, especially if these were to be made in public. "The corruption crackdown induced sluggish luxury retail sales and VIP activity clearly signaled just how much high-end consumption was due to corruption," Forbes said.
Of course, it is almost impossible to estimate the amount of corruption, but Chinese scholar Minxin Pei estimated that kickbacks, bribes (including those made as gifts) and "outright theft from public coffers" reached approximately 3% of GDP - almost as much as the Chinese Government is spending on education.
On February 5, the Chinese authorities decided to prohibit luxury advertising on all the TV and radio channels, because such ads "encouraged people to give gifts like luxury watches, rare stamps and gold coins, which has publicized incorrect values and helped create a bad social ethos,” according to a circular issued by China’s State Administration of Radio, Film and Television (SARFT).
Cutting off luxury ads just a few days before the New Year, of course, contributed to a decline in sales in this category of goods.
Chinese jewelry giant Chow Tai Fook announced alarming sales results generated by its retail stores in January and February - they fell 2% compared with one year ago.
However, a probe made into primary data sources in Chinese proves that New Year sales went without a hitch. According to China UnionPay, the national payment system in China similar to Visa, card transactions in the New Year period in China increased 43% compared with a year earlier. It is noteworthy that card payments in jewelry stores rose 119%, while transactions in shopping malls were up 44%. However, it may be more likely that these data indicate an increase in the use of bank cards to make purchases than a sales increase as such.
“Festival spurred brisk sales of gold and jewellery products. New year-themed gold items sold well, investment gold bars remained hot-sellers” – this was the conclusion made by the Hong Kong Trade Development Council (HKTDC) in its market survey conducted a week after the Chinese New Year across 11 Chinese cities, namely in Beijing, Dalian, Qingdao, Xi'an, Shanghai, Hangzhou, Wuhan, Chengdu, Guangzhou, Fuzhou and Shenzhen.
At a press conference held last March, the Shanghai Association of Gold Jewelry announced that during the seven-day holiday week gold jewelry sales in Shanghai reached 720 million yuans ($ 116 million), up 18% against the last year. The stores of such companies as Lao Fengxiang, Lao Miao and China Gold Group were setting the pace having boosted their sales more than 20%.
Jewelry sales generated by Cai Bai alone – one of the largest shopping centers in Beijing - yielded 600 million yuans ($ 96 million). According to China.Com, it is this store which was most visited by consumers shopping for the New Year, whose most popular choice was gold jewelry pieces bearing symbols associated with the New Year of the Snake.
Dasha Platonova, Editor in Chief of the Asian Bureau, Rough & Polished
