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September 22, 2017

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Exploring China's mix of 'guanxi,' gift buying and politics

HONG KONG--Giving gifts is crucial if you want to get ahead in Chinese politics or business, but what do you do when you don't know whether your boss is about to be promoted or tossed out of a job?

Judging by sales of certain luxury goods in the Chinese shopping heartland of Hong Kong, that's a conundrum facing more than a few well-heeled mainland visitors during the Golden Week holidays from Oct. 1.

The break is a boom sales period for Hong Kong stores, but this year it's coinciding with a slowdown in the Chinese economy and the buildup to Beijing's once-a-decade leadership transition.

The crucial congress that will name the new chiefs of the secretive Communist Party will take place on Nov. 8, state media has announced.

Few analysts expect any surprises at the very top — Vice President Xi Jinping appears certain to replace President Hu Jintao — but what happens at lower levels of China's vast machinery of state is anyone's guess.

Rumors are swirling of deep divisions within the party's elite, and many analysts say this leadership transition is the most turbulent since Jiang Zemin's appointment as party leader in 1989.

Evidence of this uncertainty could be on display in the jewelry shops of Hong Kong, where sales of expensive watches, a bellwether of the luxury gift market, have fallen in recent months, analysts and retailers told AFP.

"There's definitely a decrease in sales this year of about 20 to 30 percent," said Wong, a salesman at a fancy watch shop who refused to give his full name.

"It feels like the customers that actually buy things have decreased. There is a big change."

Analysts put this slump down to China's slowing economic growth — at 7.6 percent in the second quarter it's the slowest since March 2009 — and a drop in overnight stays by mainland tourists.

"If you're coming for an overnight stay you probably have a bigger budget and you also have more time to spend it," HSBC Greater China Economist Donna Kwok told AFP.

"Looking at the big picture, the most important thing is that China, for now, is in slowdown mode."

But there are also signs, largely anecdotal in nature, that at least some of the fall in certain categories of luxury goods could be linked to doubts about who will be in power after the all-important party congress.

Chinese consumers spent an estimated US$49 billion on luxury goods last year, a quarter of a global market worth US$197 billion. They are poised to overtake Americans this year as the biggest buyers of luxury goods in the world.

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