Hey Big (Shanghai) Spender…

It was recently reported in The Economist in a worldwide cost of living survey, that Shanghai is now a more expensive city to live than New York, ranking 42nd, with the Big Apple bringing up the rear in 47th. Disposable income in urban areas has seen a 37-fold increase since the late 1970s, and the spending power of Shanghai locals has never been more fierce. A new crowd of wealthy Shanghainese are emerging, and these big rollers are setting the pace for a more commercial and cosmopolitan Shanghai than we’ve ever seen before.

In a city with GDP per capita of RMB 82,960 (US$ 12,784) and a ‘Very High’ HDI (Human Development Index) ranking, the standard of living statistics for Shanghai makes it the most enviable city to live in China, and soon, quite possibly, the world. By 2020 Shanghai’s economy is expected to expand five-fold to become the richest economic region across the globe, and efforts are being developed across the city all the time to make this goal a reality.  This is no more significant than in the financial sector, where 133 companies in the Shanghai and Shenzhen stock market last year reached total revenue of RMB 162,331 billion, with 13.9 billion in net profits and an astounding 64.3% yearly growth. Fang Xinghai, Director of the Shanghai Financial Service Office, says that by 2020, Shanghai will be an "international financial centre in tandem with the national economic strength and the international status of the renminbi," and as a result, more and more fresh graduates are looking to secure a career in finance, where a lot of the big money-making opportunities lie.

But this just accounts for some of those who are fast on their way to making the big bucks in China’s most cosmopolitan region. Business travellers, workers in the food and beverage industry, young investors and entrepreneurs are currently dominating the luxury scene, and putting down a tab of a thousand on one meal, or several on a night out, without so much as a second thought. Consequently, luxury business industries, particularly the car industry, have exploded in the last few years, with an estimated 8.2% rise year upon year in luxury spending within the mainland. It is estimated that some 132,000 Shanghainese have a personal wealth of RMB 10 million (US$ 1.54 million) or more, and that a surge in the buying of fine wines and classic Chinese art is becoming more prevalent. The average age of the Shanghai millionaire, which is 39, is also 15 years younger than the average Westerner. 30% of those are female.

“Shanghai's rapid economic development and exploding real estate market has created a situation where 1 in every 175 people in Shanghai is a millionaire," said Rupert Hoogewerf, the chairman and chief researcher of the Hurun Report. And that figure only looks to rise.

In a city like Shanghai, it’s often difficult for businesses to keep up with the growing spending power of these emerging entrepreneurs and wealthy locals. However one such business that has continued to be successful in Shanghai over the last seven years is Bar Rouge, which underwent an image revamp in February to keep itself fresh for the wealthy crowds it often attracts at the weekends. Antoine Pernet, Director, says that in order to remain competitive, staff in nightclubs like Rouge need to be conscious of who to look out for as the big spenders in town. “Our doorwoman and reservation manager, as much as the global management (service, floor, bar) are trained to identify watches, luxury bags, attitude and clothing. Numbers of big sales are done by a quick identification at the door.”

When asked how much the wealthy will normally spend in a night he cites RMB 700 as the price visitors will put down on a table, but points to those who seek the VIP treatment in town as the real money burners. “The Dom Perignon VIP area, which is 3 floors high overwatching the crowd, the DJ, and a dancing podium is where those who make the big bucks will come to show off. Here there’s a RMB 12,000 minimum spend.”

Luxury travelling has also seen an influx in recent years, and is an area that is expected to skyrocket in Shanghai over the next few years, with more and more services catering for the upper-middle class. It is reported that the average Chinese national visiting London will spend an average of £1,058 (RMB 10,528) on a single spending spree, accounting for nearly a third of all luxury shoppers in the British city. Likewise, in the US, Chinese visitors’ spending has seen a 30% increase, with total expenditure according the USA Today anticipated at somewhere in the US$ 5 billion bracket. "It's astonishing," says Fred Dixon, NYC & Co.'s senior vice president of tourism and convention development. "It's one of the powerhouse markets."

Alison Gilmore, exhibition director for the International Luxury Travel Market (ILTM) Asia, a leading group in representing the global luxury travel community agrees. “The new generation of Asia-Pacific luxury travellers is defining the future. The young Chinese luxury traveller appears to be following the Western trend of ‘spending for experiences’ in their travel preferences.” And the numbers only keep on growing. “The world is preparing for 100 million outbound travellers from mainland China in 2020.”

Another trend that’s seen an explosion of interest in very recent years is in luxury yacht ownership. At Shanghai Double Happiness Shipyard, currently, there are 200 workers making 20 boats a year, and even then, that figure might be too small for this exploding market. The post show report of the 2011 China (Shanghai) International Boat Show saw a sale of over 50 luxury yachts, and a turnover of RMB 1 billion (US$ 153m), the highest recorded in China. “The new generation of wealthy Chinese consumers loves boating and private jets,” said Pierre Gervois, CEO of China Elite Focus, a specialised agency for VIP events targeting wealthy Chinese travellers, and as such, Double Happiness is just one of many companies looking to meet the increased demand. It is expected that by 2015, there will be 10,000 luxury yacht owners across China.

With such an influx of expenditure going into the luxury market, it’s no surprise that we’re now having to pay more for taxis to get around Shanghai, that our supermarket spending is becoming more comparable to what we’d spend in the West, and that real estate within wealthy Gubei and Pudong, as well as central regions like Xintiandi, have sky-rocketed. In 2011, the average price per square metre for a new residential apartment was estimated at RMB 22,432 (US$3,532).

So open that bottle of Moët & Chandon and indulge. You’re living in the new ‘Upper East Side,’ sweetie.

What the Wealthy Want
The Hurun Report 2012 surveyed 600 millionaires in mainland China with more than RMB 10 million in personal wealth and turned out some interesting results in terms of what Shanghai’s rich and famous like to buy. We were particularly surprised about the success of Nokia…

Hotels & Holiday Destinations
Best Shanghai Hotel: Pudong Shangri-La
Best Domestic Destination: Sanya
Best International Holiday Destination: France

Cars & Yachts
Best Super Luxury Car for Self-Drive: Bentley
Best Super Luxury Car for Business Use: Rolls-Royce
Best Luxury Car For Business Use: BMW
Best Luxury Car For Self-Drive: BMW
Best Sports Car: Ferrari
Best Luxury Yacht Brand: Azimut
Best Super Luxury Yacht Brand: Riva

Fashion & Accessories
Best Luxury Jewellery Brand: Cartier
Best Writing Instrument: Montblanc
Best Luxury Fashion Label for Men: Giorgio Armani
Best Luxury Fashion Label for Women: Chanel

Drinks & Cigars
Best Cognac: Hennessy
Best Whisky: Chivas
Best Champagne: Moët & Chandon
Best Chinese Liquor: Wuliangye
Best Cigar: Davidoff

Auction Houses, Private Clubs and Golf Clubs
Best Auction House: Christie's
Best Private Club: Shanghai American Club
Best Private Club in Shanghai: Shanghai American Club
Best Golf Course in Shanghai: Tomson Golf

Mobile Phone
Best Mobile Phone: Nokia

Media
Best Online News: Sina
Best Business Daily Newspaper: China Business News

Hobbies
Preferred Hobby: Travel