Chinese Luxury Tax Sends Consumers to France to Get Their Louis Vuitton Fix

Posted on April 23, 2012

Luxury firms such as LVMH are heavily focused on Asia these days because that's where the luxury consumers are. Chinese consumers love their Louis Vuitton handbags and are continuing to buy. But the latest numbers provided by LVMH show a slowdown in luxury goods purchased in China.

Big spending Chinese tourists are leaving China and heading to Europe to get their Louis Vuitton fix, because the good are now cheaper in Europe than they are back home in China. This raises the question: why is a Louis Vuitton handbag cheaper to buy in Europe than it is to purchase in China?

The government of China has discovered the joys of the luxury tax. The taxes are so high that the same LV bag costs 45% to 47% less in France than it does in China. Chinese tourists also travel to Hong Kong, where the items are less expensive.

This turn of events has luxury firms quite worried, as they are all spending huge amounts of capital to invest in infrastructure and marketing in China. Asia is the now the slowest growing region for LVMH's fashion division. Christina Passariello reports from Paris:

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