Chinese investors turn to liquor, art, aphrodisiacs as markets dry up(2)
At the December auction, a businessman from Jiangsu province dropped $US8300 on two dozen bottles of liquor of uncertain vintage - their water-stained cardboard packaging suggested they were old - almost four times the starting price on the auction docket. "If I held these for a while, I could definitely make some money," said the buyer, who didn't provide his full name.
China's banks are getting in on the action. Industrial & Commercial Bank of China, China's biggest state-owned lender by assets, set up a fund for customers to invest in high-end pu'er tea, marketing it as a low-risk investment.
China Merchants Bank Co is planning to allow some customers to trade diamonds through its website.
Auction house Googut helped three banks set up bank-run investment funds for customers to invest in baijiu and other liquors. Mr Liu, Googut's chairman, said the funds are eyeing an annual return of about 20 per cent.
The problem for Chinese investors is that returns have evaporated from more traditional markets. Real estate was once China's favourite investment, but government efforts to contain price increases and keep housing affordable have led to price stagnation and even declines in some cities.
China's major stock exchange in Shanghai is down almost 20 per cent since the beginning of 2011. Bank deposit rates are lower than the pace of inflation, meaning savers effectively pay banks for the privilege of handling their money.
"There really are very few investment channels," says Ren Jun, a 30-year-old media entrepreneur with investments in contemporary art, antiques, gold and silver. "That's why I'm kind of forcing myself to be brave in trying new options."
China's central government is less than intoxicated by the investment party. It said last November it would tighten oversight of Chinese asset exchanges, warning of "serious speculation and price manipulation" among some and adding that some "managers have run off with clients' funds".
Some of the biggest boom-and-busts have taken place at art exchanges.
Roaring Yellow River, a traditional landscape painting by the late artist Bai Gengyan, was the first work listed last year by the Tianjin Cultural Artwork Exchange. Within two months of the offering, shares were trading at nearly $US3 each, up from about US15c, valuing the painting at about $US18 million. The previous auction high for the artist's work was a bit more than $US600,000.
About two months after the offering, the Tianjin city government suspended trading in 'Roaring Yellow River' and another painting, and the exchange imposed limits on daily and monthly price changes. Shares of 'Roaring Yellow River' now trade at about US20c, down more than 90 per cent from their peak.
Shanghai financial-software designer Jimmy Wang sank about $US790,000 into shares of a pink diamond and a jade pendant traded on the same exchange, putting up his house as collateral to finance the investment. He says he has lost as much as 2.7 million yuan. "So basically I've lost my house to the bank and I am struggling to pay the interest," he says.
Such hard-luck stories haven't slowed the hunt for the next great investment.
Wang Jingbo, chief executive of wealth-management company Noah Holdings in Shanghai, said late last year she was considering recommending to clients a fund that invests in high-end watches. Googut's Mr Liu believes the next market to watch is white jade.
Mr Ren, the media entrepreneur, says he is looking at diamonds. "While silver and gold may see fluctuations depending on international markets," he contends, "the price of diamonds never drops".
