Men guard a Louis Vuitton store in Shanghai. (Photo : Reuters)
For the first time in years, China's sales of luxury goods have shrunk thanks to an anti-extravagance campaign rolled out by the government in 2013.
According to Bain & Company, an international management consulting firm, the luxury goods sector reported a decrease in its sales in 2014 with only 115 billion yuan ($18.79 billion) of reported revenue.
While luxury goods consumption had been growing steadily in the past two years, with 2012 reporting a 7-percent increase and 2013 a 2-percent increase, this type of consumption declined by 1 percent in 2014.
In 2014, the sales of men's luxury watches dropped by 13 percent, while profits from high-end men's products went down by 10 percent.
Meanwhile, the government has reported that luxury products bought overseas, or through "daigou," have increased by 70 percent. It seemed that some Chinese prefer to buy directly from these "daigou" agents than head to malls and boutiques to get their hands on luxury items.
The fight against extravagance is part of the government's campaign to eliminate corruption in all levels of the government. President Xi Jinping has been advocating frugality among government officials, most especially in senior levels, since 2013.
The campaign banned officials from holding indulgent banquets with the use of public money, drinking while on lunch during weekdays, as well as lavish weddings and gifts to their children and other family members.
Around 5,000 officials were punished after being found to have violated the anti-extravagance law in 2013. Further, over 100,000 officials found guilty of corruption were penalized in 2013. As the government intensified its anti-graft campaign, several senior-level government officials were removed from their positions and sent to prison.
While some think the move is quite drastic, others laud President Xi for his anti-graft clampdown. According to the Chinese leader, the campaign is crucial to steer China toward its goal of becoming a global leader.
"The public only trusts a clear government and the public only gives their support to the kind of government that exerts its power properly," said Xi.
He added: "We should continue to build a disciplinary and prevention mechanism to curb corruption."
President Xi also reminded fellow government leaders that "no one can enjoy absolute power above the law."
He further stated: "Anyone who exercise power should serve the people, be accountable for the people and consciously accept supervision of the people."
