Luxury sales sag in corruption-plagued Shanxi

The upcoming Lunar New Year is not making life for luxury retailers in north China's Shanxi Province any easier as sales continue dropping amid the ongoing anti-corruption campaign.

"In the past, wearing top brands at work attracted admiration. Now it invites suspicion over corruption, so everybody is being low-key these days," said a local government official surnamed Gao.

Officials like Gao have become very cautious over what they wear in the coal-rich province, where more than 15,000 party cadres and government officials were investigated for disciplinary violation last year.

Corruption and bribery are seen as driving unsustainable growth for China's luxury market, where expensive watches, bags and clothes are given as gifts in exchange for business favors.

Gao wears a wristwatch to work, but his is a souvenir from a work conference. Luxury brands are now off-limits for officials.

In 2013, Yang Dacai, former head of work safety administration in neighboring Shaanxi Province, was sentenced to 14 years in prison after pleading guilty to taking bribes and holding a large amount of property which he cannot account for.

His corruption was exposed after internet users found pictures of him online that show him wearing different expensive watches. These pictures raised questions over how he could afford so many luxury watches with his salary.

In Taiyaun, capital of Shanxi, the bustling downtown shopping district, where luxury brands such as Louis Vuitton, Gucci, D&G and Hermes have opened stores, are experiencing dwindling customers in the run-up to the Lunar New Year.

Wealthy coal mine bosses and government officials have long been the patron of these luxury brands in Taiyuan. But with the crackdown going strong, stores are finding it hard to get by.

A sales manager surnamed Liang at one of the shopping malls in downtown Taiyuan said sales of renowned international brands have seen across-the-board decline during the first two months of this year.

Men's products have been hit the worst this year, with sales down 30 percent overall and even halved for some niche products.

Facing slumping sales, retailers have ramped up promotion efforts. But still sales shrink.

Growth of the luxury goods in the Chinese mainland have already weakened, with the market down one percent to 115 billion yuan in 2014, the first decline after eight years of consecutive growth, according to consulting firm Bain & Company.

According to Guo Xinping, a sociology professor at Shanxi University, the anti-corruption drive is a real game changer for the province.

"For a while, career success is measured, to some extent, by what you wear, but then the anti-correction campaign kicked in and effectively curbed official excess," Guo said.

The luxury industry will not crumble in China, Guo said, but its growth will moderate after years of unsustainable growth fueled by corruption and bribery.