Mongolia isn’t a country commonly associated with luxury. But some of the world’s biggest luxury brands are betting on it. Chinese consumers are the trump cards Mongolia is counting on.

For years, Mongolia’s economy has depended on mining — in particular copper — that has left it vulnerable to repeated boom and bust cycles as commodity prices fluctuate. Now, it is pinning its hopes on a surge in tourism from consumerist China to also drive its emergence as a destination for luxury spending, hoping to add a fresh arrow to its economic quiver.

Over the past year, Rolex, Versace, Burberry and Gucci have all established bases in the capital. Commercial buildings housing luxury outlets, such as the Shangri-la Mall, are becoming a more regular sight. Meanwhile, Mongolia saw a 19 percent increase in Chinese visitors in 2018, and a 15 percent rise in sales of luxury products that industry insiders say simply can’t have been driven solely by the domestic market. Overall, retail sales rose by 22 percent, to $2.9 billion, according to latest figures.

And in the first half of 2019, a period which overlaps with the start of the Hong Kong protests, mainland Chinese tourists made up more than a third of all visitors to Mongolia — even as Chinese tourism to Hong Kong has fallen by 42 percent. Chinese consumers and tourists drive the global luxury economy — they’re responsible for a third of the industry’s spending — but experts predict sales figures for luxury brands in Hong Kong will fall between 30 and 60 percent this year. Yet that could prove a surprising fillip for Mongolia’s luxury sales, they say, as Chinese tourists pick the country’s northern neighbor more. The country is targeting 1 million foreign visitors in 2020 — compared to 598,000 in 2018.

According to McKinsey & Company, Chinese consumers spent $115 billion on luxury goods in 2018. By 2025, this figure is predicted to reach $170 billion, meaning Chinese consumers will be responsible for 65 percent of market growth over the next six years. Over 70 percent of China’s luxury spending is by tourists when they travel abroad.

Traditionally, Hong Kong — famous for some of the lowest tax rates in the world — has been the preferred destination for Chinese luxury shoppers. But the pro-democracy protests have changed that in recent months. That’s where Ulaanbaatar — a shorter flight away from Beijing compared to Hong Kong — could come in. Mongolia’s sales tax is 10 percent, with no additional luxury tax. (source: Ozy)