While countries around the world are opening their borders and economies in the aftermath of a pandemic, China is enacting harsh measures to maintain its ‘zero-Covid tolerance’ policy. As a result, the economy has suffered, and another unintended consequence has emerged, affecting the secondary market for high-end luxury goods.
According to reports, an increasing number of Chinese people are selling their prized possessions, such as Rolex watches and Hermès bags. The rationale is to make money, but according to experts, the prices of these goods have fallen so rapidly in recent times that it is a loss-making trade for the panicked sellers. According to a Financial Times report, the price of used Rolex Submariners, a must-have ‘watch’ on every collector’s list, has dropped by nearly 46% since March of this year.
Meanwhile, classic bags like the Hermès Birkin have seen their market value drop by up to a fifth over the same time period. This drop appears even more bleak when one considers that six months prior to the Shanghai lockdown, the price of the aforementioned Rolex watch had risen by nearly 240%. ‘The boom has passed. We are entering a correction period that could last a long time,’ SCMP quoted a seller of used luxury watches in China as saying.
Why are prices falling?
As WION has extensively reported, one of the primary reasons China has lagged in economic recovery is its ‘zero-Covid tolerance’ strategy. For months, the Communist Party of China (CPCtough )’s lockdown measures resulted in a drop in manufacturing as factories and offices remained closed for extended periods of time.
The fact that China is experiencing one of the most severe heatwaves in recent memory hasn’t helped its cause. The Yangtze River has dried up due to the extreme heat, while the electric grid is struggling to meet rising power consumption demands. Earlier this week, Goldman Sachs reduced China’s growth forecast by 0.3%, from 3.3% to 3%. Meanwhile, Nomura cut its forecast from 3.3 percent to 2.8 percent.
The downgrade comes after the Chinese economy grew by only 0.4% in the third quarter, with the Politburo abandoning its target of 5.5 percent growth by the end of the year. When these factors are considered together, it is clear why China’s second-hand luxury goods market has seen a turnaround.