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Qinhui(Eliza) Shen

Kristen Foster

CO 150. 401

13 December 2013

To the Price Control Administration of China:

With the immediately economic growth, more and more Chinese are able to fly abroad to buy the luxury products and travel every year. It should be a good phenomenon, which can indicate that Chineses lives have been improved a lot. However, there are some negative opinions about this phenomenon, especially from the prospective of Chinese customers and Chinese governments. As a Chinese customer, I really care about this issue and have some related experience. So I did some research during the previous weeks, then I found out that increasing difference in pricing did bring some troubles to the whole Chinese Government and whole marketing economics. I think the related government should treat this problem seriously and come up with some solutions to solve this problem, such as controlling the price fairly, providing discounts frequently. Now I would like to explain some details about this issue. In 2012 Chinese Customers are the worlds largest spenders on these kinds of luxury brands (Zhang, et al.). It is normal to find out that two-thirds of the customers crowded in the shopping mall come from China, especially during the Christmas and Thanksgiving (Chinas Luxury Market). The reason why Chinese consumers would prefer buying brands products abroad is to avoid the comparatively high price charged in Chinese markets. Because of the high

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price of these luxury products, Chinese governments gross fiscal revenue is deducted, the consumption atmosphere gets worse, even the gap between the rich and poor can be enlarged. First of all, from the prospective of Chinese government, as we all known, most governments income relays on the prices of commodities (Farrar, Lara). However, nowadays, there still existing a huge market for counterfeit products which is increasing every year (Li, at al), which not only influence the governments revenue from real fashion brands but also weakening the consumptive atmosphere in China. Because of the much higher prices of these fashion products in China, some customers pursue the social and emotional value of the products (Luxury Experiences in China), regardless of the legal, to buy the counterfeit products. It is normal that counterfeit products are not necessary to pay for the personal revenue, thus the government will loss the gross fiscal revenue from this part (Farrar, Lara). In addition, higher prices on the luxury brands encourage people to go abroad to buy the same products which stimulate the overseas travelling enterprise (Chen). Tourism also can promote the development of the local economics and industries around, together with the local brands will be delivered by month to mouth and be well-known over the world. In a word, the higher prices on these products actually dramatically decrease Chines governments revenue from various aspects. Secondly, from the prospective of Chinese luxury consumers, keeping the luxury products at a comparatively high price will arise the problems about social states and the conflictions between the poor and the rich. In China, most of luxury customers purchase these luxury items is to demonstrate the good social statuses, which could give some opportunities in businesses or other situations. The motivations for luxury consumption of the consumers are mostly self -reward, instead of seeking the practical use of products and the really favorite or connoisseurship to these

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luxury brands (Luxury Experiences in China). People can be easily judged their social states and divided into two-classes: the rich and the poor by their belongings, such as handbags, out-wear and shoes. So if the relevant government involves in adjusting the price on the tags, such as lowering the price appropriately, these products would be less expensive. Meanwhile, lowering the prices can help the customers save money as much as possible for purchasing and collecting other famous brands products while preventing from buying fake luxury items (li, at al). Therefore, cutting down the prices would be big deals for them; in addition, cheaper luxury products would stimulate Chinese luxury products consumers purchase more luxury goods which will lead to an inflating consumption on luxury brands (2011 China Luxury Market Study). More people can afford the luxury, the less possibilities the poor to be jealous to the rich, thus this society will become more harmonious. According to my analysis of these groups above, it is obvious that both the group of luxury customers and the group of luxury brands support cutting down price discrimination policy which concerning about the company and personals own benefits. Since China has entered into WTO for many years, free-traded has been put into practice for along time. Price discrimination policy is a good strategy for companies profits, however it will be the obstacle in economy growth. I feel really appreciate that you can read this letter. I hope the government will do something to solve this problem seriously and absorb more foreigners travelling and shopping in our country. Thanks for taking the time to read this,

Qinhui Shen

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References

2011 China Luxury Market Study. bain.com, BAIN & COMPANY, 15 Dec. 2011. Web, 23 Oct. 2013. Bian X, and Valoutsou C. Consumers Attitudes Regarding Non-deceptive Counterfeit Brands in the UK and China. Journal of Brand Management, 2007, 9(7): 485-91. Web, 13 Nov. 2013.

Chen, Osward. HK Attracts Brands Spenders. Chinadaily.com.cn. China Daily, 28 Jun. 2010. Web, 13 Nov. 2013.

Chinas Luxury Market Exceeds America. Peoples Daily, 21 Sep. 2009. Web, 13 Oct. 2013

Farrar, Lara. China Said Mulling Luxe Tax Move. WWD: Womens Wear Daily, 3 Mar 2012, Vol. 203 Issue 52, p4-1, 1p. Web, 10 Oct. 2013.

Li, Guoxin, and Guofeng Li, Zephaniah Kambele, Luxury Fashion Brand Consumers in China: Perceived Value, Fashion Lifestyle, and Willingness to Pay. Journal of Business Research, 28 Oct. 2011. Web, 10 Oct. 2013.

Luxury Experiences in China. KPMG.com/cn. KPMG, Apr. 2011. Web, 20 Oct. 2013.

Want China Times , 21 Mar. 2012. Web, 15 Nov. 2013.

Zhang, Zhiming, and Erwan Rambourg, Steven Sun, Lina Yan, et al. China Luxury Tax: No High Hopes on Low Tax. HSBC, 18 Jul. 2011. Web, 20 Oct. 2013.

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