China's rapid economic growth has seen incomes swell, and along with it an insatiable appetite for luxury. It's expected China will become the world's top luxury market in the next 5 to 7 years.
Xie Xiaoya is getting ready for a cocktail party. After putting on her favourite Valentino evening dress, she carefully chooses a matching handbag and shoes.
As a partner of an advertising agency in Beijing, Xie earns about 500 thousand yuan a year. She says at least one third of her annual income is spent on buying designer goods such as clothes, watches, bags and shoes.
Xie Xiaoya, Partner, AD Agency said "Brands give people a kind of self-confidence and social recognition."
Xie is just one example of China's fast-growing wealthy middle class. China's rapid economic development has created a formidable consumer force for luxury goods.
Despite the global financial crisis, China's luxury consumption saw a 30 percent increase in 2009. In the same period, the traditional luxury markets of Europe, Japan and the U.S. saw large-scale declines in sales.
Last year, Chinese consumers splashed outnearly 64 billion yuan on luxury goods. China has now surpassed the U.S. to become the second biggest luxury market after Japan.
According to the latest report by Ruder Finn, Louis Vuitton, Chanel and Gucci are the three most sought-after brands for Chinese consumers this year. Many luxury houses are realizing that expansion in China is simply good business sense.
Ge Jing, Manager of Lenux Luxury Store said "The economic setbacks didn't have a big impact on high-end consumption in China. You can see that almost all the luxury brands are suffering from a shrinking market in all parts of the world except China, where the market is still growing. So we're very confident and that's why we decided to open the store in China."
So far, 80 percent of the world's renowned luxury brands have expanded into China. Chinese Academy of Social Science revealed that in the next five years, Chinese consumers will spend more than 95 billion yuan on luxury goods. Analysts say China's economic growth looks set to continue, and consumer confidence will remain buoyant.
Louis Kuija, Senior Economist of China Office, World Bank said "We've had the Asian crisis, we've had the recent financial crisis, and China's growth has been fairly robust. I think that is giving people confidence. It is giving firms the confidence to continue investing, it's giving people the confidence to continue consuming."
The latest figures show China has overtaken Japan as the world's second largest economy in the second quarter. Although expected for some time, the news will cement the confidence of global luxury companies investing in China.
But as wealthy Chinese continue to spend up big, many are concerned about the widening income gap in China. They view the appetite for luxury in the context of a country where the average income remains low.