China's Corruption Crackdown & Selling Private Jets

Of champagne wishes and caviar dreams interruptus.

 It is generally well-known that the ongoing Party-led purge--they have these sorts of campaigns in every generation or so--has negatively affected businesses aspiring to cater to high-living mainland Chinese noveau riche. Witness, for instance, the loss of gambling revenues in Macau. Rules ostensibly designed to limit officials taking public moneies to wager in the world's largest gambling destination have more broadly slowed mainland-sourced business as limits to the money that mainlanders can transfer to Macau have had an effect.

Once more demonstrating that you need not look far for IPE-relevant material, I saw this article in Yahoo! News: it turns out that the apparatchik purge is also slowing down the previously lucrative trade of selling private jets to Chinese billionaires. As you probably know, the PRC now has the second highest number of billionaires after the United States--which is fitting since it also has the world's second-largest economy. That said, similar concerns occur over inequality since the presence of many billionaires tends to skew the distribution of wealth. If such concentration of wealth arouses controversies over the fairness of modern economic systems--witness "Occupy" and other protest movements in the West--then it should be even more of concern in an ostensibly "socialist" country that by necessity styles itself as a "worker's paradise."

So these neo-Marxist-Leninist-Maoist busybodies keep interrupting marketers seeking to cater to the ultra-high net worth category described in the Hurun Rich List. Bah! Just as I was reading the flight test of the Bombardier Learjet 75...From Agence France-Presse:

Makers of the world's private jets are looking to promote their aircraft as business tools in China rather than luxury toys for the super-rich, as a corruption crackdown slows sales in the country.

Chinese leader Xi Jinping launched a drive against graft after he came to power in late 2012, accompanied by policies to enforce austerity among officials -- hitting sectors ranging from high-end liquor to luxury watches. The market for private jets is a small, albeit fast-growing aviation segment in China, but the corruption campaign has taken some heat out of the market, according to industry officials.

Instead of packing their bags and heading home, the makers of private jets have cleverly rethought their sales pitches. In place of the "Who's Who" and "Lifestyles of the Rich and Famous" marketing ploys of the past that are almost certain to get private jet buyers in hot water with state nannies, these jets are now being sold as essential business tools in concluding deals and whatnot. In other words, they've moved from having an aspirational to a more--how do I put this--utilitarian [!] aspect:

"Business jets should not be treated as a luxury product because it's considered a business tool to improve efficiency," said Christine Yan, Bombardier's China marketing manager for business aircraft and aerospace. "As long as this benefit can be recognised... in the long run it's still a very good outlook," she told AFP on the sidelines of the airshow.

Manufacturers remain positive about the longer-term outlook for the China market, citing steady economic growth and Chinese companies heading abroad to do business. "For a long time, it's been wealthy individuals buying a jet because they needed somewhere to put their money. It was cool to have a business jet," said Greer of Honeywell. "There's starting to be a recognition that this is a tool that you can utilise to be more efficient," he said.

While the rhetorical reformulation reminds me of folks selling beachfront property in Montana, you certainly can't fault them for trying anyway. Nor are the movers and shakers of Chinese capitalism dissuaded by the current crackdown as most imagine purchasing these trink--I mean, serious tools for conducting business in the near future:

In a survey this year, independent wealth publisher the Hurun Report estimated 40 percent of China's "super-rich" -- defined as those with fortunes of at least $16 million -- plan to use private jets in future. The Hurun Report's founder Rupert Hoogewerf said Chinese buyers typically pay $20 million to $80 million for a private jet, but some individuals are now renting for a one-off trip or time-sharing with others. "It's the evolution of the market," he said.

Elsewhere in the article, it is also discussed how the authorities are actually facilitating the opening of airports and landing strips to cater to private jet owners. So, smart money would say that beyond the facade of a "crackdown," seeds are being sown for the evolution of this market segment. Ultimately, nobody really buys this commie BS--least of all the Communist Party of China.