China Declares War Against Foreign Luxury

The upscale districts of Shanghai and Beijing sparkle with high-decibel status, from Armani to Prada to Burberry. The newly-minted Chinese upper class doesn't seem to mind this. But based on a report in this weekend's Financial Times, the government seems to have a problem.

Seems as though the Shanghai Municipal Industrial and Commercial Administration (and you thought we have leaden bureaucracy over here) has posted a notice on its website that warns against the shoddy construction, mislabelling and even dangerous components that their official quality checkers identified in fancy-schmantzy items.

The FT reports that a spokesman for Armani politely described the Chinese gripes as "not issues that are raised anywhere in the world. We pride ourselves on the quality of our products." That's a very understated response for understandable reasons: no manfacturer wants to alienate the gatekeeper to this enormous market.

Of course, there's an economic reason for the government acting as wardrobe nanny. They simply want to do as much as possible to discourage the purchase of foreign goods, and to convince those Chinese who have the money to drape themselves in luxury that locally-manufactured stuff can actually be superior. As the FT writes, "...the administration said its quality checks showed that consumers should not judge clothes solely on their price and on whether they had been imported."

Earth to the Chinese government: people who buy luxury goods don't give a damn about their shoddy workmanship or the pH levels in their wardrobe (Burberry was forced to recall a line of men's trousers last November when the quality checkers found an excessive pH level).

The nervousness of the Chinese government reflects an interesting reality. The country has roared to the export leadership position it has achieved without creating any "brands." That's the inevitable next step. Rather than bashing foreign luxury brands, my bet is that the Chinese will start to produce their own luxury statements. What better signal that they have moved from emerging to "emerged" status than if they could compete not just on low-cost manufacturing, but on the rarefied level of the superficial? Now that's the global recognition they're looking for.

So it's only a matter of time until Prada and Vuitton start facing the same threat from the Chinese as everyone else they're putting the squeeze on, and until Burberry starts shaking in its pH-flawed trousers.

China's combination of amazing growth and ever-abiding mystery make it one of the coolest places in the world, and coolness is the lingua franca of luxury marketing. If foreign buyers suddenly start finding China's status goods appealing, then suddenly they'll be in high-demand for local consumption, too. That would give China the spectrum from low-end to high-end success, and be one more nail in the economic coffin of Europe, for whom luxury products are an irreplaceable part of the economy.

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