How a quest for identity made China the luxury powerhouse that it is today

• China's fascination with luxury goods stems from a quest for "traditions," says "Red Roulette" author Desmond Shum.
• "Traditions provide identity. As CCP has destroyed Chinese traditions, luxury brands step in to provide that," he tweeted.
• His observations stemmed from a conversation with an unnamed "leading authority of global luxury industry." 

China is a luxury-goods giant.

Consider this: The country's luxury market is set to hit 816 billion yuan, or $115 billion, by 2025. That's a quarter of the global total, according to a February report by accounting firm PwC.

In comparison, the US and Europe could each represent 22% and 23% of the global luxury market by 2025, PwC wrote in the report.

It's such an important market that even Bernard Arnault — the CEO of French luxury conglomerate LVMH and the second-richest man in the world — is set to visit the country this month following a share slump.

Behind the country's luxury boom is Chinese buyers' quest for "identity" in the absence of traditions, says Desmond Shum, the author of a contentious book titled "Red Roulette, An Insider's Story of Wealth, Power, Corruption and Vengeance in Today's China."

In a lengthy tweet on Friday, Shum — whose rags-to-riches story "vaulted him into China's billionaire class" according to the book's blurb — said he spoke with an unnamed "leading authority of global luxury industry" who shared insights about China's love for all things luxury.

"He said China is the most fertile ground for luxury brands. Because CCP has destroyed tradition / religions in China, and Chinese are socially competitive and status-conscious," Shum wrote.

"Traditions provide identity. As CCP has destroyed Chinese traditions, luxury brands step in to provide that," he further wrote, citing the unnamed expert.

"That bag tells themselves and the society around who they are," he wrote. The tweet has almost 500 likes and has been viewed over 140,000 times since being posted.

Shum and his publisher, Simon & Schuster, did not answer Insider's request for comment, so we don't know who his unnamed source is — but we did speak to several other luxury experts about the link between the CCP's destruction of Chinese traditions and its luxury boom.

—Desmond Shum (@DesmondShum) June 2, 2023

The Chinese consumer culture is a 'melting pot' of values

China's consumer culture has been molded by a melting pot of values, Pierre Xiao Lu, a professor at Shanghai's Fudan University specializing in luxury marketing research, wrote in a Wharton report back in 2011. 

During the post-reform period, the country's flat socialist structure suddenly "opened up vertically," Lu wrote.

This was particularly evident in the 1980s, when China decided that a "much easier and a quicker way to develop the economy was to shift rural populations into cities," Karl Gerth, a professor of history at the University of California, San Diego, told Insider. Gerth is also the author of a book called "Unending Capitalism: how consumerism negated China's communist revolution."

Rapid urbanization and consumerism did more to fuel China's luxury boom than a lack of religion, he said.

"For people living in the cities, it's harder to communicate to other people who you are. You're no longer part of a clan that knows exactly what your family is. So you have to communicate that to other people in different ways — that another way is through the consumption of mass-produced branded stuff."

China's new private markets made a "whole bunch of people rich very quickly" and fueled a huge boost in consumption, Gerth said.

"Those people feared that the policy was going to change overnight, so they were incredibly keen to turn their hard-earned money into products as quickly as possible."

Now, the choice of brands is not just a part of wanting an identity. It also creates a distinction among Chinese consumers, Yuwan Hu, an associate director at Beijing-based Daxue Consulting, told Insider.

In China, mature luxury buyers differentiate themselves from entry-level buyers by showing their understanding of the luxury market — for example, the discerning consumer would go for popular brands such as Hermès, Chanel, Dior, and Louis Vuitton, she said.

"That's more important than searching for identity," she added.