Today is Mid-Autumn Festival day in China, held to celebrate the harvest. Traditionally it features the exchange of moon cakes filled with lotus paste and egg yolks, whilst children go to lantern parades.
But in recent years, it has also become synonymous with corruption. Silver moon cakes, as pictured above, became a common gift for officials, as well as gold-adorned moon cake boxes. And the corruption even extended into schools, as the Financial Times reports:
“For the past decade many Chinese parents have seen nothing wrong with giving teachers gifts to ensure that little extra for their child – maybe a seat at the front of the class, or a position as the Chinese equivalent of milk monitor. In the old days, lucky teachers might have scored a Louis Vuitton handbag or a day at the spa, but now most are lucky to receive grocery coupons or a popular brand of throat lozenges.
“Last year the official China Youth Daily reported that one university student managed to secure a pass in a major exam by plying her teacher with four boxes of top quality milk. But these days even the milk ruse won’t get past the government’s abstemiousness monitors.”
This year, things are indeed different. Luxury goods manufacturers are seeing sales tumble. Fine wine sales for government officials have collapsed by 90%, according to Decanter magazine, which goes on to add:
“We can see a great shift here as the market moves from an era of government-led procurement and opportunistic profiteers to a market driven by genuine consumer consumption.’
Rooting out corruption is the No 1 priority for the new leadership, as highlighted on the official China Daily website, which lists all the leading officials who are now under investigation across the country.
At the same time, the government is collapsing the property bubble, which has become a severe threat to future economic stability. As a result, consumption based on the property ‘wealth effect’ is also collapsing.
Companies and investors need to go rapidly up the learning curve on these new developments. This is why we are holding our second China Transformation webinars tomorrow. The webinar is free, and there are two options to attend – one timed for Asia /Middle East; one for Europe/Americas/Africa.
The main topics are:
- How commodity trade fraud on metals in China could lead to a new global economic crisis
- Problems faced by the polyester industry: Severe oversupply and a collapse of global cotton prices
- The reform drive and what it means for future growth
- The need for companies to reposition themselves as China’s economy changes
Please register here to join the discussion.
WEEKLY MARKET ROUND-UP
The blog’s weekly round-up of Benchmark price movements since January 2014 is below, with ICIS pricing comments:
Brent crude oil, down 7%
Naphtha Europe, down 6%. “Crude oil futures eased as rising supplies from Libya were matched with tepid demand caused by mediocre refining margins”
Benzene Europe, down 5%. “The key driver was the US market….With demand for benzene derivatives in Asia sluggish, in particular in styrene, this is pushing more material out of the region for export to the US.”
PTA China, down 3%. ”Operating rates were relatively low, as producers were running their plants to meet demand, to avoid a build-up in inventories”
US$: yen, down 1%
S&P 500 stock market index, up 10%
HDPE US export, up 13%. “Buyers are cautious and not willing to buy large volumes of material, waiting to see whether prices will move lower”