Products marked "Made in China" are known more for low prices than luxury.

Yet an increasing number of luxury goods companies are now outsourcing their production to the manufacturing powerhouse.

Nearly 60 percent of international luxury goods companies now have production facilities in China, according to Global Luxury Report magazine.

Some have kept it secret, but not Burberry and Coach.

Burberry closed its plants in Britain and moved the production lines to Guangdong province.

The US brand Coach acknowledged this year that 80 percent of its production comes from China, but the company is now considering closing some of the plants as labor costs rise.

Prada IPO

Famed Italian brand Prada plans to raise $2 billion in an initial public offering on the Hong Kong stock exchange this year, according to a report in China Business News that cited Goldman Sachs. Outsourced production makes up about 80 percent of Prada branded goods, according to Goldman Sachs.

But some companies are concerned their brand value could be damaged by ever-increasing outsourcing because most consumers consider the country of origin as a standard in evaluating luxury goods.

"As part of intellectual property rights, brands need to be well protected by companies as intangible assets," said Francis Gouten, founder of Gouten Consulting Ltd, who has 35 years of experience in the luxury goods business.

"Luxury goods corporations may damage their brand credibility if they fail to control the outsourcing of production," Gouten said.

They should remember that most of their customers pay handsomely for brand allure, he said.

Many luxury goods were traditionally made in small workshops run by families. Some renowned jewelry and watch brands are crafted using elegant manufacturing techniques inherited from generation to generation.

Country of origin

"They are unlikely to be produced by other countries. For consumers, the country of origin is the symbol of social status and wealth," Gouten said.

A recent report by KPMG, one of the world's four largest auditing firms, said that brand consciousness among Chinese consumers is gradually rising. The rich love French brands most, followed by those from Italy.

"Chinese consumers do not like to buy 'Made in China' luxuries, so those brands that value the Chinese market need to take this important fact into consideration when expanding their outsourcing," said Mark Ritson, associate professor of Marketing in Melbourne Business School.

"Another reason for Coach reducing the number of its outsourcing plants in China might be to increase the brand's value in the Chinese market," he added.

Gouten said luxury companies should remember their long-term interests. "True luxury brands respect their clients," he noted.

(Source:China Daily)