The spending spree by Shanghai residents intensified in the second half of last year, according to statistics from the Shanghai Statistics Bureau. Much of the cash is being used to purchase luxury goods.

Research shows that people between the ages of 25 and 35 are the biggest spenders. Researchers believe today's young people will continue to enjoy life rather than save the best for last, as their parents were taught.

According to Shanghai customs officials, automobile imports hit a record high of 3,286 in the first five months of the year, an average of 21 per day. BMWs, Mercedes-Benzes and other luxury sedans were among the imports. Shops that carry other luxury items are springing up downtown.

Plaza 66 is an example of an outlet once available only to the wealthiest residents.

Some insiders have cast doubt on the survival of high-end outlets.

A recent forum held by China Europe International Business School (CEIBS) was aimed at penetrating the mysteries of luxury consumption.

CEIBS invited those who operate the luxury-brand businesses to provide explications.

Alice Chen, general manager of Dorgay Jewellery, said the doubt shed on the luxury stores is groundless. She said she had just opened her first showroom in Plaza 66 this April and in one year she would regain all her investment and make a profit.

"We are not a supermarket, so the number of visitors does not decide how much we earn," she said. "Our customers are stable and long-term; sometimes they even purchase a 300,000 yuan (US$36,232) finger ring by telephone rather than come to the shop."

David Ennes, brand manager of Lancome in the L'Oreal Group, dismissed worries about the health of luxury businesses, saying: "The limited number of luxury consumers is exaggerated. We perceive there are at least 600,000 people in the city who are potential consumers of luxury items." Ennes revealed the figure was provided by market research firm AC Nielsen.

French trade commissioner Isabelle Fernandez has said China's entry into the WTO will beef up the luxury business. "WTO will lower the tariffs on luxury products to approximately 30 per cent, which will lead to more consumption in the sector," she said.

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