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Hong Kong looks to lure shoppers from mainland China

Elements, Hong Kong's latest colossal shopping mall and luxury goods temple, is a living illustration of the city's bid to lure a new generation of brand-mad spenders from the Chinese mainland.

The new development has a massive 1,115m2 Gucci store, not to mention Prada, Ferragamo and Versace boutiques.

It has a direct rail link to Hong Kong's airport and buses to and from Shenzhen airport just over the border to draw some of the more than 10 million mainland visitors who pour into the southern territory each year.

The visitors above all come to Hong Kong to take advantage of low import and sales taxes on luxury brands, although the market remains in general less sophisticated than Europe.

A Chanel spokesman said the territory did not yet show a huge demand for haute couture designs in the same way that Los Angeles or Paris would, but the demand for ready-to-wear is huge.

"The Hong Kong economy has developed one of the most affluent consumer societies in the world and this in turn has created opportunities for Chanel," the spokesman said.

The company, however, also uses Hong Kong as a launching pad into China, to tap the rapidly growing middle class in major cities and has plans for expansion over the next few years.

Betty Leong, head of retail development at MTR Corp, the rail conglomerate that spent US$10 billion developing the area that includes the Elements mall, said Hong Kong was now taking full advantage of mainland appetites.

"A lot of individual visitors from the mainland travel to Hong Kong and this number will only go up. We are building on our mainland customers," Leong said. "There's definitely a big demand for luxury products here. Our statistics show the more established the brands, the better their businesses have performed."

Official figures show Hong Kongers spent HK$30 billions (US$3.8 billion) just on clothes and accessories in the first 11 months of last year, one of the highest per capita spends in Asia.

In the same period, advertising spending on luxury fashion brands in Hong Kong, including Christian Dior, Louis Vuitton, Gucci, and Dolce & Gabbana was 14 percent more than the whole of 2006 at HK$432 million, a survey by market researcher Nielsen showed.

And the advertising seems to be helping draw mainland Chinese into the fold.

A recent HSBC study showed that three-quarters of affluent mainland Chinese have bought luxury goods, citing the products' quality, fashion and status symbol as the reasons for their purchases.

Moreover, China's growing economic might means it has itself become a powerful figure in the fashion industry.

Hong Kong Fashion Week launched this week, with the Chinese shopper high in the mind of the top Asian designers who gathered to show their fall and winter collections.

"Hong Kong is an important platform to reach the China market. We have made a lot of effort to invite buyers from the mainland," said Katherine Chan, a spokeswoman for the show.

Last year, the show attracted 5,037 buyers from China, up from 4,260 in 2004.

"They have high purchasing power and are willing to spend money on fashion," Chan said.

Increasingly, luxury brands and designers are by-passing Hong Kong to head straight into China.

Last year, Italian luxury group Fendi staged a speculator fashion show on the Great Wall to show off its new line partly designed by Karl Lagerfeld, while Giorgio Armani continues to expand into major Chinese cities.

Lane Crawford, one of Asia's oldest luxury department stores based in Hong Kong, also opened its first branch in Beijing last year. It has estimated there are about four million luxury goods customers in Beijing alone.

"Whether it's luxury product or not, companies are interested in the Chinese market," said Mary Chiang, who has more than two decades of experience in public relations and represents some of the biggest global luxury brands. "China's population size is huge. It has a fast growing economy. It's only the tip of the iceberg. Whatever you sell you would want to go into China."
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