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By
AFP
Published
Aug 19, 2014
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Targeted by anti-corruption purge, wealthy Chinese are being careful

By
AFP
Published
Aug 19, 2014

Hong Kong, (AFP) - Facing the Communist Party’s (CCP) anti-corruption and frugality drive, Chinese elites are reining in their spending in Hong Kong and Macao.


Hong Kong is suffering from the anti-corruption campaign in China (photo AFP)



President Xi Jinping, who has been in power since late 2012, has launched a major anti-corruption campaign with the slogan "fight the flies and tigers” - in other words, he intends to combat against corruption among both low and high level officials.

The disgrace of several prominent members of the CCP, some of which have been thrown into prison, has created shock waves among the elites, now constrained by a frugality to which they are unaccustomed.

Careful not to attract the attention of Beijing, the Chinese wealthy are now opting to tighten their belts while waiting for the storm to pass, or at least to remain in the shadows until its time to pop open the champagne…

Hong Kong and Macao, which have become luxury and gambling “Meccas" for spendthrift Chinese, are now being squeezed by President Xi’s crusade, according to experts.

"Anti-corruption crackdown shows no signs of slowing down. It has created a lot of concern within the country and as far as I can see a lot of high profile individuals are much more cautious about their overt spending," said Steve Vickers, a former head of the Royal Hong Kong Police’s Criminal Intelligence Bureau, who has moved into the private sector.

Macau, the world casino capital (far ahead of Las Vegas in terms of turnover), saw its revenue decline for the first time since the 2008 financial crisis.

According to casino supervisors, industry revenue fell by 3.7% in June as compared to the year before, and 3.6% in July. The slow down is clear in terms of "VIP" customers who purchase all-inclusive holidays for tens of thousands of dollars.

Yet "there are no signs on the horizon to suggest that a VIP recovery is imminent,” warn analysts Grant Govertsen and Felicity Chiang.

"To the contrary, the anti-corruption crackdown in the PRC (China) seems to be accelerating / expanding, which in our view should result in continued, although indirect, pressure on the VIP segment,” they predict.

Factors such as the economic slowdown in China, the dissatisfaction - to put in lightly - of those Hong Kong as regards to Mainland China’s position of power and the anticorruption crackdown have all contributed to a big fall in retail sales in Hong Kong.

Sales of jewelry, watches and other luxury items often given as gifts in China have declined by 28.2% in June, according to official figures.

"At this critical moment, you don't want to lavishly spend a lot of money and draw attention overseas even if it's your own money,” said David Ji of the real estate firm Knight Frank.

The trend is also apparent in the PRC. The private jet market is slowing down, tycoons are deferring the acquisition of their first yachts and serious wine amateurs are sticking to water.

"The premium end of the imported wine market has been affected starting two years ago. The impact is still felt today," laments John Watkins, CEO of ASC Wines, one of the largest importers in China. Sales of high-end bottles and vintages bought by Chinese officials have dropped by 80 to 90%, according to him.

European luxury brands are also feeling the pinch. The group Rémy Cointreau saw its debt rating lowered by Standard & Poor's in early August because of the falling sales of cognac in China.

To escape the watchful eye of Beijing, the moneyed Chinese are inclined to do their shopping further and further afield - in Europe, for example.

“It's no longer just Hong Kong and Macau that are their stomping grounds for luxury purchases," suggests Steve Vickers.

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