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Qinhui(Eliza) Shen Kristen Foster CO 150. 401 22 Nov. 2013 Controlling the Luxury Price at a Fair Rate is Necessary

In the US market, each iphone 5s’ selling price is $649 and 5c’s is $549, which can be transferred into RMB 3972 and RMB 3360, while in China market the price for 5s and 5c are RMB 5288 and RMB 4488 respectively (Apple). The price in China is definitely higher than those in the foreign markets. Not only Apple, the electronic products, many other well-known universal brands have been set at a higher price in some countries, especially for the new listing. According to CLSA, Asia-Pacific Markets predicts that China would account for 44% of global sales by 2020, up from 15% in 2011, which will worth Euro 74 billion or 0.6% of China’s total GDP-the monetary value of all the finished goods and services produced within a country's borders in a specific time period (“China to Become”). In 2012, Chinese consumers are the world’s largest spenders on these kinds of luxury brands (Zhang, et al). The luxury brands, as “Krug” or “Dom Pérignon for champagne, Guerlain for fragrance and cosmetics, Hermès for leather goods” (Chevallier, and Mazzalovo), get 45% higher income than in Hong Kong, and over 50% higher income than in US when they are sold in Chinese Mainland (Farrar). Owing to the high prices of these brands’ goods, these products in Chinese mainland are from 30% to 400% more expensive than overseas (Shih), Chinese consumers would prefer buying brands’ products abroad to

the middle class in China is about 25% of the country’s population. such as the Ministry of Finance would disagree with cutting down the prices on brand’s products. However,cutting down the price would be regarded as an advantage for the rich. And lowering the prices on brand’s products can reduce the cost of them. eliminate the gap and contradiction between the rich and the poor gradual (Farrar). which would be advantage for the whole Chinese government in total.103) per year are considered to be the middle class (Zhan. Moreover. because most of people can have the luxury goods. and He Yanqun. the research made by Zhan Lingjing.000 RMB (i. but also the more Chinese people cannot afford the goods if they become cheaper. reducing the prices on overseas’ products will decrease the differences between the rich and the poor. thus. Some part of Chinese government departments. so that it will reduce the conflicts between the rich and the poor. Hence. an assistant professor of The Hong Kong polytechnic University.441–USD $16.. the main target consumers for the brands are middle class and upper class in China. However. They said that part of products’ prices can be used as the resource of government incomes. controlling the price fairly is needed. if the prices are cut down.e. or about a half of the urban population (Luhby). it may lead to the unbalance between government’s payment and net income. the Chinese who make 40.Shen 2 avoid the comparatively high price.001-100. to attract more Chinese consumers purchase on the brands’ items in Chinese mainland instead of purchasing abroad. USD $6. so that not only the middle class and the upper class can buy them. Therefore. and He). According to the definition given by McKinsey & Company. an assistant professor of Fudan .

Li Guofeng and Kambele Zephaniah states that many Chinese consumers buy luxury goods because they can use these products to show their success. When the people who can purchase on these kinds of brands can be less showing off (“Should the Government Cut Import Duties on Luxury Goods?”). Because of the much higher prices of these fashion products in China. If the overseas brands’ . Li Guioxin. a research made by KPMG. counterfeiting in China is increasing every year. shows that the Chinese consumers purchase on luxury products for seeking the desirable social consequence (Zhan.”). and as well as the raising of purchasing on genuine luxury products. there would be less possibility that let the poor to be jealous to the rich. which influence the value of real fashion brands. which is proportion of 46% in 2008 and 33% in 2011. China also contains a large market for counterfeit products (Li. some of Chinese consumers who prefer using these product to seek the social and emotional value of the products but cannot afford it would buy counterfeit products (Li. and He). et al). sophistication and social state (Li. is for representing social status and wealth (“Luxury Experiences in China. which can change some Chinese’s psychology of hatred to the rich. tax and advisory firm. if it has the lower prices on well-known goods.Shen 3 University. an audit. presents that the main motivation for well-known consumption. Therefore. What’s more. et al). so that it could also progressively decrease the social contradictions caused by the gap between the rich and the poor. Besides the huge consumption of genuine brand’s products. these products would be less expensive. controlling products at a fair price also could provide a healthier consumptive atmosphere in Chinese Mainland. Besides. so that people would be less showing them off. et al).

Besides bringing a better environment for the Chinese Mainland’s consumption by changing the consumer behaviors and the economic structure. which promote the growth of Chinese domestic company (Should the Government). Like in the southwest China’s Yunan Province. accordingly. because of the much lower prices than other stores in mainland China.Shen 4 products are sold cheaper. The less expensive famous goods can also stimulate the development of domestic enterprises. the most benefit of cutting down the prices on products is that can increase the gross fiscal revenues of Chinese. a Shanghai-based analyst with McKinsey & CO. it will be a great shock to Chinese companies. during the period from 2004 to 2009. mentions that cutting down the prices on goods can shift the location of consumption to China indeed (Farrar). there will be much more Chinese consumers can pay for those goods. it could possibly cause the eliminating of counterfeit products market in China. The abroad purchasing is a large market. which let loads of brand’s goods sold out (Should the Government). it will urge the Chinese domestic companies that enhance their products’ quality to meet with the consumers’ desire for high-quality goods. In a word. When the well-known brand which stand by the high quality have much less prices.8 billion” in Hong Kong (Chen). to buy cheaper goods to save money. Who is willing to buy a counterfeit product if the genuine goods are within the affordable ranges. abundant of Chinese rushed into the newly opened Kuming shops for shopping. according to the statistical data collected by China Daily. the Chinese visitors in Mainland “brought about additional spending totaling more than K$84. Yuval Atsmon. lower prices on .

lowering the prices on tags might be considered as a move favor to the rich. but also the people from another classes. thus. which get the shopping market flow back to China itself. which might cause sensitive political problem in Chinese. if the prices of luxury goods get down. non-price discrimination competitive market. as a result. in fact.Shen 5 products let the Chinese consumers who purchasing overseas right now to buy these goods in China." (Ding. according to the commerce ministry of Chinese government said that reducing prices on well-known products would boost consumption at home and as Liu Huan. it is also beneficial to the economy of China because it can raise the gross fiscal revenues greatly. an adviser at the Central University of Finance and Economics said. . which would increase the business income for the government. In addition. cutting down the prices can help making a preferable consumption circumstance in China and create a clear. it’s a method that not just benefit the rich. to the contrary. In addition. there will be much more consumers purchase. et al). it will be good method that reduce the bias between the rich and the poor. which is good for the economy of China. Besides these. "It should stimulate domestic consumption as consumers will spend more in the domestic market. not only these global well-known consumption but the whole consumption would be stimulated. Nonetheless. the gross fiscal revenues of Chinese government would increase.

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