BEIJING, Mar. 1 (Xinhuanet) -- A street in Shanghai is dotted with Swatch outlets and Haagen-Dazs ice cream shops, while once in a while a gentleman passes in Hugo Boss suits with his girlfriend in Prada skirts.

    Shanghai, the richest city in China, is seeing a spate of people take to the extravagant lifestyle, rapidly shifting its economic demographics, reported Xinmin Weekly, a Shanghai-based magazine.

    No longer the backwater it was two decades ago, wealthy denizens are showing a strong craving for luxury items in Shanghai, or China at large, which with a market value of US$two billion and biggest growth rate globally is already a promising world luxury market.

    Haagen-Dazs, the premium ice cream maker, opened its 28th store in China last month along the Huangpu River. The glassy store provides a perfect view of the Bund area of Shanghai.

    Zong Weiqun, the manager overseeing the Chinese market for General Mills, which owns Haagen-Dazs, said their business has been growing at 40 percent annually since they made a presence in China in 1996.

    "The sales is impressive. Last year was the best ever, when we launched ten stores," he said.

    Luxury automaker Rolls Royce introduced its first model since merger with BMW in China simultaneously with the world at 5.88 million yuan (some US$708,000). Six cars have been sold in the past four months.

    Feng Shihong, head of Rolls Royce's Shanghai operations, revealed that their customers are mostly local businessmen in the real estate sector.

    Economist Yue Zheng from the accounting firm, Price Waterhouse Coopers, believed that Shanghai's market for luxury items has over 100,000 stable customers. "The number is not big, but it soars sharply."

    "The most expensive and the cheapest brands always have a need in China," said Feng.

    The industry observers said the phenomenon was exacerbated in the Chinese economy where there is high GDP growth and gaping chasm between rich and poor.

    Denizens in China buy luxury items, but they think differently.

    Lu Yu, director of a Shanghai-based culture communication corporation, earns 100,000 yuan (some US$12,000) per month. He is a big fan of brand-name products.

    "I can afford it, and it is necessity for me," he said, "I bought them for their good quality."

    "Shopping top brand names is a treat for me after the toil of hard work for days."

    A 34-year-old banker in Shanghai who wears a 2,000-dollar wristwatch believed it makes him look more mature and dignified. " It bolsters my confidence."

    Yang Qingshan from Beijing Modern Marketing Institute held that luxury items are "a proof of one's wealth and taste."

    Zeng Jun, 31, a freelance advertisement producer makes 20,000 yuan (US$2,400) per month. "Half of my salary goes to the brand-name suits, Hugo Boss suits, Fraggamo shoes, North Face jacket."

    Zeng is also a bicycling fan. When he rides, he is clothed in Patagonia, the top brand for outdoor activities, known for windbreaking and ventilation. The entire set costs the same as his monthly salary.

    A lot more Chinese could not afford the brand-name items, so instead they buy accessories of the brand names, like purses, ties and shoes.

    Columnist Sun Zhe with the Fashion magazine in China pointed out that whether they only buy accessories makes the watershed between the really wealthy people and those who struggle to join in.

    Driven by Chinese people's enthusiasm, the latest information from the industry showed that brand-name makers will be more aggressive this year to lock in greater profit.

    Haagen-Dazs will open at least another ten stores in China, LV will launch two to three, while Cartier will expand the number of outlets from three to fifteen in three years.

    Jacques Franck Dossin, analyst with the Goldman Sachs Group Inc. said China's luxury market will develop at the highest speed in the coming 10 years and take the world's second place by then, with the largest customer group. Enditem