Major Tian Authors

China Roundup: Bitcoin Prices Plunge; Luxury Market Slows Down; and Housing Prices Rise

December 20, 2013


The week that was: luxury retail in China slows down as the government’s anti-corruption measures take effect; over-the-counter exchange markets widen their reach; housing prices rise; and bitcoin prices nosedive.

China broadens OTC exchange nationwide

More small and medium-sized companies will have access to China’s over-the-counter (OTC) exchange market, as the Chinese State Council announced last weekend that the National Equities Exchange and Quotation System, or NEEQ, is now open to all “qualified” firms all over the country. The system was established a year ago to help unlisted companies raise capital, and it was only accessible for businesses based in four high-tech parks in Beijing, Shanghai, Tianjin and Wuhan.

Currently more than 350 companies trade in the market, but some analysts believe that the number could reach 7,000 in five years, with a total market value of RMB 1.4 trillion.

The decision is viewed as China’s latest move to reform its financial market, making a shift from the current “approval-based” system towards a “registration-based” one. The announcement has made clear that during their NEEQ applications, companies with less than 200 shareholders will no longer need approval from the country’s top regulator—China Securities Regulatory Commission.

Luxury sales growth slows in China

Wealthy consumers in China are still buying more luxury goods in 2013, but the 2% growth is the slowest rate since the year 2000, reported Bloomberg on Tuesday. This contrasts a 7% increase in 2012, and according to a report from consulting firm Bain & Co, growth in 2014 will likely be the same.

China’s crackdown on officials’ overspending and President Xi Jinping’s anti-corruption campaigns are believed to have contributed greatly to the slower growth, but Chinese shoppers are also maturing—instead of snapping up whatever is the most expensive, they are looking for differentiation.

And this gives many second-tier brands an opportunity to expand in China, The Wall Street Journal reported last month. While top notches like Louis Vuitton and Gucci are experiencing “flattish” sales, brands like Coach and Givenchy are gaining traction quickly. According to a survey commissioned by Swarovski, a fashion company known for its crystal jewelry, more than 75% of Chinese buyers favor trying new brands, the highest percentage of all the markets the company monitors.

China’s housing price: nowhere to go but up

Remember those measures to curb skyrocketing home prices? You might want to take them with a grain of salt—in November, new home prices in China jumped 9.9% from a year earlier, with double-digit hikes in major cities like Beijing and Shanghai, CNBC reported.

According to data released by China’s National Bureau of Statistics on Wednesday, new home prices in Beijing rose 16.3% year-on-year while in Shanghai the prices climbed 18.2%; Shenzhen and Guangzhou in the south both logged 21% increases. Of all 70 cities that the government monitored, prices in 69 had gone up.

Existing home prices surged as well—20% in Beijing and 14% in Shanghai. The number advanced 14% and 12% in Shenzhen and Guangzhou respectively. Earlier this year, in hope of containing existing home prices, the State Council decided to enhance the collection of value-added taxes on second-hand property sales, which also reportedly resulted in a spike in divorces (as a way to avoid the tax) among Chinese homeowners.

The rise could trigger some responses from the government, but they are not likely to come soon. CNBC cited property consultant Donald Han saying that the authorities “will probably keep it status quo at least in the next three to six months and potential new measures may come in the second half of 2014”.

Wanda Group to partner with Alibaba in e-commerce

Wanda Group chairman Wang Jianlin and Alibaba’s lead founder Jack Ma may have different views toward traditional and online retail—but it won’t stop them from teaming up in business.

Earlier this week, reports came out that real estate giant Wanda will partner with Alibaba, China’s leading e-commerce company, to launch an online platform for the former’s six shopping malls on Christmas Eve. And the platform will eventually cover all shopping plazas of Wanda next year.

Alipay, Alibaba’s equivalent of Paypal, has also added Wanda’s movie theaters to its public services platform this week, allowing its users to buy movie tickets through their digital wallets.

The two billionaires’ $16 million bet on whether e-commerce would dominate brick and mortar stores went viral last year—Wang believed that the two would coexist well while Ma was convinced that the traditional model would shrink dramatically in the next decade.

Wang recently told reporters that the bet was meant to be a joke, but he still believes that there will be space for offline businesses to thrive in the future.

Bitcoin price dives after tighter scrutiny from China

You may be tired of it but bitcoin made headlines again this week—stories came out on Tuesday that authorities from People’s Bank of China, or PBOC, had met up with all the major third-party payment service providers and asked them to stay away from the digital currency.

A representative who attended the PBOC meeting told Chinese media that more than 10 companies were summoned to the closed-door gathering, where participants were told that they should not provide clearing or payment services for virtual currencies such as bitcoin and litecoin. Those who have already done transactions should stop their practices and related deposits must be completely withdrawn before the Chinese New Year.

This is the second time in two weeks that Chinese regulators have weighed in on bitcoin. An earlier announcement this month had sent bitcoin price down 20% temporarily. But following this week’s news the price has plummeted as much as 50%. It’s also bouncing back much slower than last time—as the time of publishing the highly volatile currency is trading at about $730.

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