Shanghai, the richest city in China is seeing a lot of residents taking to the trendy and somewhat extravagant, as the city rapidly shifts its economic demographics, reported Xinmin Weekly, a Shanghai-based magazine.

While Swatch outlets and Haagen-Dazs ice cream shops pull in more and more clientele, men in Hugo Boss suits and young women in Prada skirts are becoming common on the city's streets.

With the city no longer the backwater it was two decades ago, luxury items are finding an expanding market there, and in China as a whole. Last year the market value of luxury items was estimated at some US$2 billion, the biggest growth rate for this sector of the market worldwide.

Haagen-Dazs, the premium ice cream maker, opened its 28th store in China last month along the Huangpu River. The glassy store provides a perfect view of the Bund area of Shanghai.

Zong Weiqun, the manager overseeing the Chinese market for General Mills, which owns Haagen-Dazs, said their business has been growing at 40 percent annually since they entered China in 1996.

"Sales are impressive. Last year was the best ever, when we launched 10 stores," he said.

Luxury automaker Rolls Royce introduced its first model in China, following its merger with BMW, which sells for a price of 5.88 million yuan (US$708,000). Six cars have been sold in the past four months.

Feng Shihong, head of Rolls Royce's Shanghai operations, revealed that their customers are mostly local businessmen in the real estate sector.

Economist Yue Zheng from the accounting firm, Price Waterhouse Coopers, said he believed that Shanghai's market for luxury items has over 100,000 stable customers.

"The number is not big, but it is soaring sharply.

"There is always demand for the most expensive and the cheapest brands in China," said Feng.

Industry observers said the phenomenon is exacerbated in China where there is high GDP growth and a gaping chasm between the rich and the poor.

Those who buy luxury items are not shy about their choices.

Lu Yu, director of a Shanghai-based culture communication corporation, earns 100,000 yuan (US$12,000) per month.

He said he is a big fan of brand-name products. "I buy them for their good quality," he said. "Shopping for top brand names is a treat for me after a hard week at the office."

A 34-year-old banker in Shanghai who wears a US$2,000 wristwatch said it makes him look more mature.

"It bolsters my confidence," he said.

Zeng Jun, 31, a freelance advertisement producer, makes 20,000 yuan (US$2,400) per month.

"Half of my salary goes to brand-name suits, Hugo Boss suits, Fraggamo shoes, and things like North Face jackets."

Zeng is also a bicycling fan. When he rides, he is clothed in Patagonia, the top clothing brand for outdoor activities, known for its wind breaking and ventilation properties. The entire outfit cost him a month's salary.

Brand-name accessories, such as purses, ties and shoes, are also popular.

Columnist Sun Zhe with Fashion magazine in China pointed out that only buying accessories marks the watershed between the really wealthy people and those who struggle to join in.

Driven by the promise of the local market, brand-name makers are expected to be more aggressive this year in their marketing efforts to secure greater profits.

Haagen-Dazs will open at least another 10 stores in China; LV will launch two to three, while Cartier will expand the number of outlets from three to 15 in three years.

Jacques Franck Dossin, analyst with the Goldman Sachs Group Inc, claims China's will be the world's fastest growing luxury market over the coming 10 years and that it will have become the world's second largest luxury market by that time.

(China Daily March 14, 2004)