Earlier this week, Bloomberg’s Sarah Shannon reported from London that the famous Harrods department store is seeing what store executives call record sales — courtesy largely of wealthy Chinese nationals. As Shannon writes, Americans are no longer in the top 10 of Harrods’ foreign customers, while buyers from China are “by far No. 1.”
On some level, the most surprising part here is Harrods’ refreshing willingness to give this kind of detail, even though that buyers from China are a huge contributor to the British luxury bottom line is no surprise. The image of the brand-hungry Chinese tourist is a current cliche, much as the bejewelled Russian was a few years ago.
Obviously, the growing wealth of China and Russia is a big factor here. The Boston Consulting Group estimates that China now has more millionaires than any countries but the U.S. and Japan — and will surpass Japan this year (you can see a partial chart below or register to see BCG’s full report here). This is an unprecedented expansion of wealth in countries where the newly reach are justifiably anxious about the stability of local markets and the future attitudes of their governments.
Wealthy Chinese nationals aren’t just buying fancy doodads at Harrods. According to the National Association of Realtors, they now make up 11 percent of foreign buyers of U.S. properties, up from five percent in 2007 (and now second behind Canadians). Get past the gaudy stereotypes and whether you look at China, Russia or the Middle East, you find a new wealthy class faced with wildly gyrating markets and with legal systems that may or may not protect their wealth from expropriation in the future.
Spending and stashing money abroad is a rational response to this kind of problem, which is not a new one for much of the world’s rich. New York and London may turn up their noses at the ostentatious spending of the world’s nouveau riche, but they are lucky to reap the benefit.