Shooting the stagehand: how China's factories are undermining their own luxury future

In the global luxury trade, the true product is not the object itself, but the illusion surrounding it. For decades, luxury brands have built entire empires not just by selling goods, but by crafting powerful stories: stories of refinement, exclusivity, craftsmanship, and belonging. This illusion has carried tremendous value, and consumers in China have long been among the most eager to invest in it. But now, something strange is happening.

On TikTok and Douyin, Chinese factory owners and workers have started going live. They point to what looks like a $2,000 handbag and say, “We make this here. Same leather, same stitching. You can buy it direct for $35.” In a sense, it is radical transparency. In another, it is something close to economic self-harm. At first glance, this trend appears empowering. It is a rebellion against markups and brand dominance, a chance for the producer to reclaim visibility and value. But behind this moment of pride lies a deeper tension. By dismantling the illusion of luxury, these manufacturers are not just undercutting foreign brands. They are destabilizing a domestic ecosystem that quietly depends on that very illusion.

The quiet power of illusion

To understand the full picture, one must look at where the money goes when a luxury item is purchased inside China. Suppose a product is sold for $100. The factory that manufactures it may receive as little as $6. But the rest of the value does not disappear into foreign bank accounts. A large portion remains in the domestic economy. Boutique rents, for example, may account for $20 of the final retail price. These payments flow into the hands of Chinese commercial landlords and retail developers. Another $20 typically covers personnel costs, salaries and benefits for sales staff, store managers, and local administrative teams. Marketing and communications expenses, often pegged around $10, are also channeled through local PR firms, influencers, media platforms, and social networks.

Even beyond these operating costs, the tax structure ensures significant value retention. Corporate income taxes on the profits of the local operating entity stay within China, as does the value-added tax (VAT), which is typically 13% and applied directly at the point of sale. These are not small sums. When considered in total, more than 70% of the final price of that "foreign luxury" item is effectively recycled into the Chinese economy.

This is the paradox: while the product may carry a foreign name, its sale represents a highly localized economic event. It fuels jobs, pays rent, supports media, and contributes to government revenue. In other words, the illusion of imported prestige generates very real domestic prosperity.

The danger of lifting the curtain

This is why the viral trend of “factory live streams” is so potentially damaging. When manufacturers pull back the curtain and say, “We made this,” they may think they are reclaiming power. But they are also collapsing the very illusion that enables the product’s premium pricing in the first place.

Once consumers begin to view luxury products as mass-manufactured items with a modest cost base and high markup, their willingness to participate in the system declines. They may opt for cheaper “factory direct” alternatives, or begin to question the need to pay retail prices at all. The consequences ripple outward. Retail sales slow. Flagship stores become unsustainable and close. Real estate revenue drops. Jobs disappear, not only in sales but in marketing, logistics, and adjacent services. The tax base contracts. Consumption fragments. Economic value migrates from formal domestic channels into informal or overseas alternatives. The illusion was not just serving the brand. It was feeding an entire network of local stakeholders. When the illusion is lost, so is the structure built on top of it.

When pride becomes erosion

What makes this situation especially complex is that the gesture itself  showing  “we made this”, is not without legitimacy. It reflects pride, skill, and a desire for recognition. After years of being the invisible backend of the global luxury supply chain, these factories are demanding visibility. They are saying: we are not just cheap labor. We are craftsmen. But without a broader shift in narrative, without a new framework that allows this pride to be monetized and scaled on its own terms, the act of revealing the truth becomes an act of erosion. The factories are not just discrediting the brand’s illusion. They are weakening the very market conditions that allowed them to thrive in the first place. There is a bitter irony here. The global value chain once treated these manufacturers as secondary. Now, in seeking validation, they may unintentionally destroy the value chain entirely.

The stage collapses when the trick is explained

Luxury has always relied on distance, mystique, ritual, and emotional theater. The boutique, the slow reveal, the scarcity, the silence. By replacing that with a smartphone video and a “factory price,” the industry loses not just margin but meaning. And when meaning disappears, so does the willingness to pay. The factories, in trying to claim authorship, may in fact be shooting the stagehand, disabling the machinery that made them profitable to begin with. Because in the end, power in luxury does not come from making a product. It comes from making people believe.