Oil, Energy and Resources

Popping the jade bubble

JDM071101jadeweek.jpg

With a flood of headlines referencing the gemstone heist movie Crazy Stone, China's news media has turned its attention to the jade business in Xinjiang. The price of white Hotan jade has skyrocketed in recent years, bringing floods of people to the Yurungkash River, where they sift through the stones of the riverbed in search of treasure.

Last year at this time, when Hotan jade was selling for "up to $120 a gram," hordes of people were already hunting for the stuff. Mark Magnier wrote this in the Los Angeles Times in September, 2006:

According to state-run media, more than 80 percent of Hotan's jade has been exploited, with some reports suggesting the supply could be depleted within three to five years. As many as 20,000 treasure seekers and 2,000 pieces of heavy equipment are said to be working the area, they say, leaving gashes in the ground as deep as 30 feet

Now there are as many as 100,000 people hunting for jade in the area. It's not hard to understand their enthusiasm. A cover feature in China Newsweek's 15 October issue reported that in the 1980s, the price of mined jade (more plentiful but less valuable than river jade) was just 80 yuan per kilo; by 1997-98, it was up to 1500 yuan. In 2004, it had reached 8000 yuan, and this year, the price of mountain jade has averaged 50,000 yuan per kilo. River jade has quadrupled in price since mid-2006.

But not everyone's getting rich. Earth-moving equipment rents for 2000-3000 yuan per day, and prospectors are sifting through the same mountains of stones that countless others have already worked over. A number of people quoted in the China Newsweek article say that perhaps 20% of jade-seekers turn a profit, while 30% break even and at least half lose money.

Reuters relates reports from the Chinese media that the local government is cracking down on the practice:

The situation had prompted authorities to issue a notice to "clean up" the phenomenon, and slap fines of up to 10,000 yuan ($1,300) on private prospectors who ignored orders to withdraw from the river.

But due to the large river area and widely-scattered nature of the jade deposits, the clean-up would be "difficult," the paper said, citing an local official.

Speculation in jade has taken off as well, with the expected range of winners and losers. Yi Shuangting, secretary of the Xinjiang Gemstone Association, says that after writing a guide to Xinjiang's gemstones and jade in the mid-80s, he was offered an 18-kilo chunk of mutton-fat Hotan jade for 180 yuan, more than twice his monthly salary at the time. Last year, a Beijing businessman approached him to appraise a 70-kilo piece that was listed at more than 3 million yuan. That piece turned out to be fake.

Yesterday's Mirror ran an op-ed comparing the current jade fever with previous bubbles:

The rocketing price of Hotan jade stems on the one hand from the non-renewable nature of jade itself, and on the other, from the multiple levels of price-hikes involved in reselling and speculation. We can't help but wonder: after clivias, Pu'er tea, and Hotan jade, what will be the next thing to go crazy?

Indeed, as China Newsweek said: Pu'er, gold, jadeite, larderite, Shoushan stone, antiques, calligraphy...as investments run wild and as the value of all sorts of investments rises all over, the upward motion Hotan jade is a typical example. Behind the spread of jade culture lie the longings of an impoverished area and an all-out pursuit of GDP. Citizens who are gradually becoming wealthier have a warped understanding of the rise in value of their own property: "I may not be able to outrun Liu Xiang, but at least I can outrun the Consumer Price Index."

Spotty understanding of market rules and a jumbled awareness of the rules that govern economic development have led to our countrymen's investment frenzy. How to increase the value of one's property after one has become wealthy has become a critical issue for them. On the one hand, it represents the people's confidence in China's economic development, but on the other, people who lack necessary financial knowledge and training will find it hard to avoid following panicked opportunism into a blind group frenzy of trend-chasing investment practices.

Compared to the stock market, Hotan jade, like clivias and Pu'er tea, is just a "host" or a symbol of the masses' opportunistic investing. This writer believes that under the present circumstances, the government should spare no effort to undertake financial education for the public.

To borrow a maxim from the stock market, there's risk in jade, so investment should proceed cautiously. We may not be able to prevent whatever comes after Hotan jade from becoming a "craze" or a "host," but we can at least stave off the frenzied assault and blind investment, and in doing so we can educate the public about the causes and effects of investment crazes so that they can avoid such risks in the future. If we can do this, then the "Crazy Hotan Jade" will have been crazy for a reason.

Links and Sources
Media Partners
Visit these sites for the latest China news
090609guardian2.png 090609CNN3.png
China Media Timeline
Major media events over the last three decades
Danwei Model Workers
The latest recommended blogs and new media
laomo2010x80.jpg
From 2008
Books on China
The Eurasian Face : Blacksmith Books, a publishing house in Hong Kong, is behind The Eurasian Face, a collection of photographs by Kirsteen Zimmern. Below is an excerpt from the series:
Big in China: An adapted excerpt from Big In China: My Unlikely Adventures Raising A Family, Playing The Blues and Becoming A Star in China, just published this month. Author Alan Paul tells the story of arriving in Beijing as a trailing spouse, starting a blues band, raising kids and trying to make sense of China.
Pallavi Aiyar's Chinese Whiskers: Pallavi Aiyar's first novel, Chinese Whiskers, a modern fable set in contemporary Beijing, will be published in January 2011. Aiyar currently lives in Brussels where she writes about Europe for the Business Standard. Below she gives permissions for an excerpt.
Front Page of the Day
A different newspaper every weekday
From the Vault
Classic Danwei posts
+ Korean history doesn't fly on Chinese TV screens (2007.09): SARFT puts the kibbosh on Korean historical dramas.
+ Religion and government in an uneasy mix (2008.03): Phoenix Weekly (凤凰周刊) article from October, 2007, on government influence on religious practice in Tibet.
+ David Moser on Mao impersonators (2004.10): I first became aware of this phenomenon in 1992 when I turned on a Beijing TV variety show and was jolted by the sight of "Mao Zedong" and "Zhou Enlai" playing a game of ping pong. They both gave short, rousing speeches, and then were reverently interviewed by the emcee, who thanked them profusely for taking time off from their governmental duties to appear on the show.
Danwei Archives
Danwei Feeds
Via Feedsky rsschiclet2.png (on the mainland)
or Feedburner rsschiclet.gif (blocked in China)
rsschiclet2.png rsschiclet.gif Main feed: Main posts (FB has top links)
rsschiclet2.png rsschiclet.gif Top Links: Links from the top bar
rsschiclet2.png rsschiclet.gif Danwei Jobs: Want ads
rsschiclet2.png rsschiclet.gif Danwei Digest: Updated daily, 19:30