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Getting used to the free market rule

By Hong Liang | China Daily | Updated: 2013-10-14 06:56

A Hong Kong friend who had just moved to Shanghai told me she was shocked by the high prices. I guess she's just not very adventurous, shopping for imported foods at high-end supermarkets and eating out at fancy restaurants.

Having worked and lived in a number of developing countries in the region, I learned long ago that if I had insisted on maintaining the same lifestyle that I'd had in Hong Kong, I'd have to pay dearly for it. That's true to some extent even in Shanghai, where a cup of cappuccino at Starbucks costs more than it does in Hong Kong.

Getting used to the free market rule

China has become an increasingly important market for global luxury brands. Xu Yan / For China Daily 

Unreasonable as that may seem, there are many Starbucks outlets in Shanghai, and many of them appear to be doing well. There are many people here who don't seem to mind paying the price for the luxury they believe they deserve. That's the free market in action, and it is hard to understand why the pricing of foreign brands, ranging from coffee at Starbucks to automobiles from Germany, has become such a big issue on the mainland.

The domestic media, led by CCTV, have mounted a campaign against what they consider rampant overcharging by foreign vendors in the mainland market. The latest objects of their wrath are Starbucks, which they noted exacts a much higher profit margin in China than it does in other markets; and French fashion house Chanel, which is selling one of its skin-care products in China at prices that are many times those in other markets.

Earlier, these consumer vigilantes zoomed in on the makers, mainly Germans, of luxury cars, accusing them of profiteering in the mainland market. The evidence most often cited is the chart showing the much lower prices of various Mercedes models in the United States than in China. For instance, a news report noted that the factory-recommended price of a Mercedes S-class sedan in China is more than 150 percent higher than the model with the same specs in the United States.

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