A New Government Ban Is Going To Hit China's Growing Luxury Retailers Hard

china luxury

Photo: Getty Images/Feng Li

BEIJING (Reuters) – Chinese radio and television stations are to ban advertisements for expensive gifts such as watches, rare stamps and gold coins, the Xinhua state news agency said on Wednesday, as part of a push by the government to crack down on extravagance and waste.Such advertisements had “publicized incorrect values and helped create a bad social ethos”, the State Administration of Radio, Film and Television (SARFT) said in a release, Xinhua said.

The ban comes after repeated calls from Xi Jinping, China’s president-in-waiting, for a renewed fight against graft. But it could take a toll on luxury product manufacturers who advertise on Chinese television and radio.

Makers of expensive Chinese liquors including Kweichow Moutai Co Ltdand Wuliangye Yibin Co Ltdroutinely dominate the annual ad auction at China’s official television network, CCTV.

Producers of the fiery Chinese liquor known as baijiu, which once flowed freely at government banquets, were hit in December by an official ban on alcohol at military events. High-end bottles of the grain-based liquor can cost thousands of yuan.

The crackdown on corruption has also hit jewellery retailers hard, especially after high-end watches became a symbol of graft.

Hengdeliand Emperor Watch and Jewelleryare the among the biggest watch retailers in China and both of their shares were down on Wednesday. Hengdeli had lost 2.2 per cent by the early afternoon in Hong Kong while Emperor was down 1 per cent.

“Watches and liquor have been influenced by government policies and have been pulled down by a change in leadership,” Rupert Hoogewerf, the founder of Hurun Report, told Reuters last month.

Xi said in a speech on January 22 that targeting the “flies”, or lowly people involved in corruption, was just as important as going after the “tigers”, or top officials.

“As important cultural and ideological strongholds, radio and television channels should fully exert their role of educating the people,” a spokesman for SARFT told Xinhua.

Xi has warned that a failure to weed out corruption and extravagance would put the ruling Communist Party’s survival in jeopardy. The party has been embarrassed by a string of corruption scandals at its highest levels.

Xi is due to take over as president at an annual meeting of parliament in March.

Copyright (2013) Thomson Reuters. Click for restrictions

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