Chinese Market Report

By I. M. Chait –

A few short weeks ago, some members of my family and I returned from China. We had not been on a buying trip to the Mainland for about a year, and this trip, of a few weeks, was truly an eye-opener. The good news is, the Chinese economy is booming. Their middle class is growing leaps and bounds, and every day hundreds or thousands of collectors come into the marketplace. The bad news is, we are all soon going to have to learn how to say “yes sir” in Mandarin.

Before I get into relating my own experiences, please let me quote some investment experts.

From Lawrence Williams of London on September 2nd, he talks about the China Investment Corporation now being pressured to invest much more heavily in non-Chinese enterprises, such as commodities and especially gold. He mentions that China “…seems to be dumping its U.S. dollars in favor of more concrete assets.” As you may or may not know, China is holding more than two trillion U.S. dollars in foreign exchange reserves. Staff of the Chinese Sovereign Wealth Fund sector work all hours of the day and night to put investment deals together, particularly in oil and precious metals.

Mr. Williams seems convinced that the U.S. dollar is going to “tank” and that China will be converting all of their dollars long before the collapse takes hold. Anyone interested can look online for his complete report where he also quotes a gentleman living in Latin America who says “…locals are now preferring their own currency to U.S. dollars”.

Now to my recent trip. What was clearly evident was that China was switching from export dependency to serious internal consumption. In China, the previous ideology of saving money has been changing, with the government discouraging excess savings and discouraging excess credit. Cheng Siwei, now head of China’s Green Energy Drive, even went so far recently to quote Benjamin Franklin in a commentary on the U.S. economy: “He who goes borrowing, goes souring.”

Here are some details and observations from pounding around the various antique markets in Beijing, Shanghai, and other cities. The price of medium quality items is two times to four times over the last year. The price of top quality items is three times to even ten times. Chinese antique dealers, with the aid of the World Wide Web, are participants in every major and every minor auction across the U.S.A. and Europe. Every mid-sized city in China has at least one auction company, and the big cities have at least four or five each.

On this trip, for the first time in three decades of shopping on the Mainland, reasonable offers were summarily rejected. As an example, I saw a nice piece of porcelain in one of the booths. I looked it over. I asked the price. I was quoted RMB (the official currency of China) 30,000, around $4,400. I thought to myself, well, this might sell for $3,000 or $4,000, so I offered RMB 18,000, thinking I could go up to 20,000 and thinking that the shop owner would probably come back first at 25,000. To my surprise he took the piece back and said “no thank you” and put it back in the case. Not only did he put it back in the case, but he went back to his computer and paid little attention to me. If this was an isolated occurrence, that would be one thing, but this was the common denominator.

The other common denominator was that singularly, each and every time I did manage to find something to buy and pulled out my usual stack of $100 bills to pay, not one dealer, even those I had done business with before, would take U.S. dollars. I had to find some friends to exchange the money into RMB. After all, why would they now want to stash U.S. dollars, which continue to go down in value when they could stash RMB which continue to go up in value?

On a side note, I again did a Beijing TV show on antiques and fakes, which is a kind of cross between the “Antiques Road Show” and the old “Gong Show.” This is one of the most popular syndicated television shows in all of China with tens of millions of viewers. The show also is syndicated around the world on various Chinese cable stations. As my wife is usually saying, “Antiques in China are like rock ‘n roll in the U.S., and the people who are experts in them are like rock stars.”

Now what’s the moral to this story? If you are interested in Chinese antiques, buy them now before the prices go out the roof and before our money loses even more credibility.