Welcome back. In this segment, you will learn why many Chinese endorse materialism and practice conspicuous consumption. In lesson one, you learned that the limits of social mobility increase the motivation of high status consumers to signal one's elite status through purchasing luxury products. In the last segment, you learned that in China, people generally believe that there is limited upward social mobility. Accordingly, high status consumers should be motivated to signal their elite status through conspicuous consumption. More interestingly, the belief in limited social mobility may also increase the tendency to purchase counterfeit luxury products. Why? If conspicuous consumption is accepted as the symbol of elite status, individuals who cannot afford the luxury products may have the urge to bolster their subjective status by consuming the counterfeit luxury products. Although this strategy may seem self deceptive, it has powerful psychological effects. If you are not in the upper echelons, it is better to be appear in the upper echelons than to admit that you are in the lower ones. This is exactly what the results of the China-US consumer survey showed. In the survey, I asked respondents to report how much they liked and how likely they are to buy luxury products and counterfeit luxury products. When a Chinese consumer feels that people have limited relational mobility, that is they cannot easily [FOREIGN]. He or she is more motivated to consume luxury products or services. High status individuals feel the urge to signal their relatively permanent elitist status. In contrast, low status individuals use conspicuous consumption to hide their low status and to convince themselves that they too can afford a luxurious consumption style. If these low status consumers cannot afford the real luxury products or service, they may opt for counterfeit luxury products. Consistent with this idea, when a Chinese consumer feels that people have limited relational mobility, he or she also has greater tendency to buy counterfeit luxury products. In the US, where the society is more egalitarian or less hierarchical, the associations between relational mobility and consumption of luxury or counterfeit luxury products are absent. Now, let us put all the pieces together. China is a hierarchical society. People know that if they are regarded as elites, they will gain many privileges. These privileges will allow them to go further up in the socio-economic hierarchy. Therefore, Chinese consumers who have gained economic status are highly motivated to signal their high status in a relative stable social network. Because of the rapid economic growth in China, many Chinese people feel that they are climbing up the socio-economic ladder, and are eager to show off their wealth through conspicuous consumption. Those who are left behind also feel that they need to pretend that, like others in the social network, they too can afford a luxurious consumption style. They are eager to do so because they know that if they are perceived by the peers to have lower status, they may risk losing assets to opportunities to advance themselves in the future. Mr. Lee is a farmer. He has a stable relational network. Most people in this rural town know each other. Mr. Lee recently made several million renminbi by selling some of his farmlands to a real estate developer. He knows that with his newly acquired wealth, he can gain higher status by joining several exclusive associations in town. Therefore, he's eager to show off his wealth and high economic status. He bought an expensive SUV and builds a three story mansion for his family. Ms. Jang is a junior administrative staff in a big IT company. She just graduated from university and lives in Shanghai, one of the most vibrant city in China. Despite living in a large city, Ms. Jang mainly hangs out with her old university schoolmates. Her work has opportunities to meet new clients, and that could lead to new networking and job opportunities. Ms. Jang feels the pressure to signal that she is an in-group member by purchasing expensive luxury goods. If she cannot afford them, she is willing to buy the knock off as long as no one can tell. Aside from luxury product consumption, relational mobility also affects how Chinese consumers react to foreign brands in China. We will get to this in our next segment.
