The changing shape of China’s economy is producing novel versions of corporate responsibility, says Paul French

It is a truth universally acknowledged that luxury brands are having a rather good time of it in China. Rising incomes and savvy marketing have met with the very Chinese obsession with aspiration, status and showing it off to all and sundry when acquired.

The luxury handbag and accessories business has been a veritable goldmine for brands in recent years. Times may be tough in old Europe and once-roaring America but Louis Vuitton is reporting 30% year-on-year growth in the Middle Kingdom.

Consultants Bain & Co estimate that Chinese luxury lovers shelled out $18bn on luxury goods last year. They predict that in three years China will leapfrog Japan and the US to take the top spot in luxury spending with $28bn in annual sales. In a recent survey of the Chinese middle class, research firm Mintel (disclosure – my day time employers) found that 70% of those surveyed were intending to buy a luxury item within the next 12 months; only 5% said they weren’t planning to buy any luxury goods ever.

So, the luxury brands are taking rather a lot of cash out of China and look set to continue to do so. But where, some ask, are their Chinese corporate responsibility programmes?

Well, there’s been some pretty basic stuff over the past few years – upscale jeweller Bulgari worked with the NGO Save the Children and issued a limited edition charity ring (yours for $420) while Gucci issued a press release about using environmentally friendly packaging. Hardly earth-shattering projects in either scope or originality, it has to be said.

A few years ago some predicted that luxury brands would become more involved with charity in China as many of their customers became more philanthropic – but, that route is fraught with PR problems as philanthropy develops in a rather uneven way in China.

We haven’t heard much more on that for the past couple of years. Similarly initiatives like Bulgari’s have not been commonly imitated by foreign luxury brands or Chinese charities, as they can backfire too – remember the bizarre story of the young lady called Guo Meimei who claimed to work for the Chinese Red Cross and posted pictures of herself online with all her, err, luxury goods?

There was a survey back in 2010 – an age ago in fast-moving China – conducted by Albatross Global Solutions and Ruder Finn Asia that claimed corporate responsibility  would influence brand loyalty for two out of three consumers. But nobody’s ever got close to replicating that response rate and that survey was flawed as it included consumers in Hong Kong and Taiwan, who are at a very different stage of socio-economic development from mainland China.

The road ahead

But luxury in China is not just about handbags. Like the purveyors of expensive handbags, expensive carmakers are doing well in China too. Car sales in China were up 27% year-on-year in May, according to figures from the China Association of Automobile Manufacturers.

Looking at sales by brand, there does appear to be a pent-up demand for higher end cars – BMW, Audi and Mercedes have all reported strong business in recent months. Additionally, the luxury segment is remaining strong too – Bentley and the leading European sports car brands are all reporting strong sales and orders.

Mercedes-Benz China has been running its Star Fund charity to aid environmental protection, music, arts, sports, education and disaster relief since 2010. Mercedes aims to involve its dealers, customers, employees and community volunteers in the campaign and has just announced an additional $3.9m in funding for the charity.

Much of the charity’s work has focused on kids and education – namely the MobileKids Children’s Road Safety Education Programme (China’s road safety stats are horrific) with a dedicated MobileKids Experience Centre in Beijing.

Anything that raises driving standards and pedestrian awareness in China is potentially massively life saving. Every day more than 200 people die on China’s roads, according to police statistics. Under current data supplied to the WHO, China accounts for 14% of global road deaths.

Mercedes has worked to promote a safer driving culture in China by publishing the Blue Book of the China Auto Society. Likewise Daimler, another luxury car brand doing well in China, has committed a portion of its corporate responsibility budget to promoting a culture of better driving.

And so, corporate responsibility in the luxury segment may be as simple as helping people to cross the road … and get to the other side safely

Paul French has been based in China for more than 20 years and is a partner in the research publisher Access Asia-Mintel.