COST OF LUXURY PRODUCTS RISE BY 8.7%, TWICE AS FAST AS CPI

US$5 MILLION REQUIRED FOR MEMBERSHIP TO NEW ‘UPPER CLASS’.

150,000 INDIVIDUALS CAN AFFORD THAT.

Hurun Report China Luxury Living Index

(Shanghai, August 15, 2007) Hurun Report China Luxury Living Index rose by 8.74% over the past year, more than double the consumer price index. Tracking the rise in costs of a basket of luxury products in China, the price hike of the China Luxury Living Index was led by increases in luxury residential, golf memberships and executive education.

Whilst the overall consumer price index climbed 3.5% since the beginning of the year, Hurun Report's index of 32 luxury goods climbed on average 8.74%, showing that price inflation for luxury products in China is considerably stronger than that of everyday products.

Rupert Hoogewerf, CEO of Hurun Report, a leading luxury business magazine in China which also publishes the annual China Rich List, says the hike in the cost of luxury items in China is driven by the growing number of wealthy individuals, a gift-giving culture and the important matter of ‘face’.  Whilst part of the increase may be associated with last April’s luxury tax of between 10% and 20% levied on certain luxury imports, it also reflects the desire of luxury brands to keep their products differentiated. The hike comes despite the 4.5% rise in the value of the renminbi, making imported goods cheaper.

What went up? A 372sqm villa in Shanghai rose by 18.6% to RMB 19m, a golf membership at the premium Sheshan Golf Resort by 25% to RMB 1.6m, an Executive MBA at Tsinghua University by 16% to RMB 290,000, a Patek Philippe Nautilus by 6.5% to RMB 234,700 and a Rolex Oyster by 4.37% to RMB 79,960.

Drinks and smokes remained largely unchanged. A bottle of Swellfun ‘baijiu’ maintained its price of RMB 2,080 whilst a packet of Panda cigarettes was still RMB 180, although a bottle of Louis XIII cognac rose by 12%.

Several items in Hurun Report China Luxury Living Index declined in price, mainly on the back of the renminbi rise. For example, the average cost of a luxury trip overseas was down by 4.5% compared with the previous year.

Hurun Report China Luxury Living Index is calculated using a basket of 32 products and services typically reserved for China’s wealthiest individuals, including golf memberships, Rolls-Royces and luxury watches. This is the first year for Hurun Report to produce the China Luxury Living Index. For a full breakdown on the latest prices of our basket of luxury goods go to www.hurun.net.

APPENDIX 1 – Hurun Report China Luxury Living Index

* Percentage price increase from 28 Feb 2006 to 28 Feb 2007

** Market price at 28 Feb 2007

US$5 million required to join new Chinese ‘Upper Class’

150,000 Chinese individuals now have private wealth of US$5 million, forming a new ‘upper class’ of Chinese society. The price of membership?  US$5 million.

Of the US$5 million required, half of that goes on the villa tucked into a prestigious compound. Next comes decorating and here a Wu Guanzhong, one of the best-known Chinese contemporary painters, on the wall seems to be a must-have and costs RMB 2.9 million. We added in a UBS private bank account, on the grounds of the fast expansion of private banking in China, and also for that undeniable status effect. Your business car is likely to be a Mercedes-Benz S600 at RMB 1.8 million. Your golf membership is probably at Mission Hills in Shenzhen which comes at the cost of RMB 1.1 million.  Your annual spend, which only accounts for 4.4% of the US$5 million.

Table: Size of Market – Number of Wealthy Individuals in China

Source: 2007 Hurun Report research

APPENDIX 2 – List of Items Required for Membership to New ‘Upper Class’

About Hurun Report Inc.

Nobody Knows China’s Rich Better!

Established as a research unit in 1999 by British accountant Rupert Hoogewerf, Hurun Report Inc. has grown into a leading research house, media and lifestyle investments business based in Shanghai, China, best-known for its rankings of the richest people in China, India and the rest of the world.

Hurun Report Inc. has four divisions: Hurun Research Institute; Hurun Media; Hurun Conferences and Training, an active events division targeting entrepreneurs and high net worth individuals; and Hurun Lifestyle and Investments, with investments in education, interior design, horses, bespoke tailoring, media and retail.

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Hurun Report

Porsha Pan

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Email: porsha.pan@hurun.net