India’s Lutyens’ Delhi – Location, location, location

Working electricity and other amenities not included.

A house in disrepair, with chipped paint and musty bathrooms. Undrinkable tap water. Poor electricity supply. Sub-zero refrigerator or infinity swimming pool? Forget it! Price range for real estate gems like this one? US$40-70 million, or more. Welcome to the Lutyens’ Delhi neighborhood of India’ capital city. Why would anyone in their right mind pay so much for something with such little upkeep? Location, dahling. Nothing screams “British Raj!” like this leafy district in the heart of New Delhi’s government district. Those with money to burn who want to live in a trophy neighborhood rich in colonial history and rub shoulders with government officials in bureaucracy-rich India have few other choices. The rare multi-acre lots that come up for sale here simply ooze privilege and cache, even though the structures that have been built on them often simply just ooze. Therefore, these properties have proven to be hot hot hot, despite their appearance.

Interested in a closer look? Check out this New York Times article on Lutyens' Delhi property prices. Then grab a suitcase of cash, head to New Delhi, put on your blindfold, and get in line.

Lifestyles of North Korea’s Elite

1% newlyweds, North Korea style.

As an outsider, not much can be said about North Korea’s 1% lifestyle because so little is known about them. Okay, we know from Google Earth images that the Dear Leader (the late Kim Jong Il) lived in a highly manicured compound with an Olympic-sized pool (which explained his svelte physique) and a waterslide. The international media has widely reported that he had an enduring fondness for Hollywood movies and French brandy. His oldest son continues to live the high life in Macau, preferring its freewheeling morality to the shackles of his homeland’s austerity and thought police. The current leader Kim Jong Un gets to call international luminaries such as basketball player Dennis Rodman as a lifelong buddy.

But what about the other elite members of society? Luckily for those curious about the lifestyles within the walled slum-fortress that is North Korea, an organization like New Focus International exists to bring insiders’ reports about day-to-day existence. This report from NFI highlights some of the aspects of North Korea’s 10% elite, which the article defines as “Party and state officials, high ranking officers in the Korean People’s Army, those who have foreign work experience or have family members who have been dispatched abroad.” The report goes on to describe the ambition of those in this privileged class to move even higher into the 1% super-elite class, which get to enjoy $12.50 whiskey shots in karaoke clubs, own private PCs, and watch international news broadcasting on wall-mounted flat panel TVs. And the weddings, oh my! A lucky few get to hold their ceremonies at the Mansudae Theatre of the Arts, which until recently was reserved for performances held exclusively for top political leaders and visiting foreign dignitaries.

Is there much social mobility happening at the top of this pyramid? Are we seeing a wider proliferation of home unit meat freezers and LCD televisions? Will any of these spoils filter down to help the starving masses? Stay tuned for the answers. I need to ask Dennis Rodman.

Come Fly with Mei

Let’s see how the other half lives, honey.

Chinese toddlers have spoken, and Chinese tour companies have heard their cry. Rich tots are no longer content with just receiving “My parents went to Italy, and all I got was this overpriced Armani T-shirt” gifts after an overseas trip. Wealthy Chinese are starting to turn away from vacations that simply revolve around luxury boutiques, follow-the-megaphone tour groups, or junket trips to gambling cities like Macau or Las Vegas. In increasing numbers, they are looking for “experiential” trips that focus on getting to know other cultures or communing with new environments. It’s the kind of trip that ordinary western travelers might call, er, a “standard vacation”. However, the similarities stop there. As reported in this Jing Daily article about new luxury travel trends for China's elite, ultra-high-end travel agencies have been set up to cater to jaded Chinese travelers who are willing to fork out up to US$189,000 for “round the world” trips. That amount of money is almost 50 times the average disposable annual income for Chinese urban residents. Yet, such first-class travel offerings are said to be selling out within a day.

One high-end agency, HH Travel, which is now a unit of Ctrip (China’s leading online travel company), claims that they had an average client spend in 2012 of $16,000 per person. Travel themes offered include an eight-day cruise in the Middle East ($13,000) or a South America adventure ($31,900). They are also offering an eight-day “Life of Pi”-inspired trip to India for $6,800. Let’s hope that this itinerary doesn’t involve one day in India and seven days on a life raft with a hungry tiger and hyena. If so, all that may be left of a toddler’s returning parents is the T-shirt.

Puttin’ on Less Ritz

Those who have been following the luxury goods buying trends of cashed-up mainland Chinese consumers have already detected a slowdown in the past year of a market that had been ripping along like a Maserati on an open highway at 4 a.m. These days, the malls in Hong Kong are looking a bit more hollowed out, with more idle sales clerks playing Candy Crush Saga on their smartphones. There are far fewer cases of a consumer walking into a Gucci store in Shanghai, pointing at a rack of ladies’ handbags and loudly commanding, “everything except that one with the frilly pom pom”, then slapping down a fat wad of RMB. More frequent looks of indifference - dare I say ennui? - come over the faces of Chinese buyers when brands such as Prada or Chanel are mentioned. As a consequence, an increasing number of luxury goods companies, including Gucci, LVMH and jeweler Chow Tai Fook, are reporting sharply lower sales growth in 2012.  

This Caixin Online article confirms and provides updates on the slowing trends. Of particular interest is the report’s focus on the importance of gift-giving to officials in return for political favors and the corresponding impact of the announced ban in 2012 of luxury goods purchases by all government agencies. The article estimates that close to 25% of all luxury purchases have been as gifts. Often, in order to disguise who was purchasing what, intermediaries were used to buy in bulk watches, leather products, or suits that cost as much as US$18,000 each. Invoicing was done more flexibly, sometimes to pass off the purchase of dozens of handbags as “office supplies.” Store exchange policies were loosened, as gift recipients seeking to swap an ill-fitting suit for a leather briefcase were unable to produce receipts.  

Despite the slowdown, no one is expecting that China will not soon be the largest luxury market in the world. China’s taste for expensive kit will not likely fade away. Luxury companies are continuing to bet on the enduring appeal of their products to mainlanders. However, the country will be better served if these hoity-toity goodies can be valued for what they are – badges of individual personal success, however garish their display – rather than a currency for the trading of corrupt practices.

A Spring Not Sprung. Yet.

It has been roughly two years since the onset of the Arab Spring. For many months after the initial tumultuous events, many observers feared contagion into Asia, most worryingly, China. Thankfully, however, sudden and violent revolution did not take place in the largest country on Earth. Disorderly disintegration would have led to dire consequences for the Asia region and beyond.

 

It is clear why such contagion fears arose. Similarities between China and the Middle East abound. Autocratic self-rule that does not reflect the will of the people? Check. Rising wealth gaps far beyond what is considered healthy? Check. High youth unemployment and discontent? Check - more than people think in China. Rampant official corruption on par with other failed states? Check. A closed official media, yet one with a flourishing social and micro-blogging network underbelly? Check.

 

So why not China? As laid out in this insightful essay in The Diplomat magazine, the country has had its share of protest movements - 180,000 in 2010 alone, by one estimate. However, the sheer size and diversity of the country may have been a key saving grace, at least to date. A country as complex as China cannot be governed centrally. Rather, much authority must be (and has been) delegated down to the regional and local levels in order for an enormous nation state to survive over the long run. As a consequence, China’s protests have largely occurred at local levels and against corrupt, low-ranking officials engaging in nefarious acts such as land grabs. Protests on the national scale have been deemed too complicated to organize as well as unlikely to remedy injustices quickly. And local shows of discontent In recent years have indeed occasionally resulted in changes to local leadership. The case of Bo Xilai in Chongqing is one of the most prominent and recent examples.

 

This is not to say that the central government is unassailably removed from danger. A country’s citizens generally recognize that morality and good leadership flow downward from the fountainhead at the top. And the new regime under Xi Jinping seems to understand the risk of not addressing corruption and wealth disparity in a timely manner, especially if another global economic slowdown throws more angry young Chinese onto the streets. If China wants a fertile spring and long growing seasons to follow, tending to the fields while the season is young is imperative.

Meat Freezer - The North Korean One-Percenter’s Must Have Appliance

Freezer Unit on the left – chock full of gifted meat

Kitchens of western one-percenters' households are equipped with the now compulsory wine fridge, some of which can hold over 200 bottles. Homes of South Korea’s wealthy include high tech kimchee refrigerators, which store the pungent side dishes in perfect aging conditions and keep the fermented smells separate from less noisome fresh produce. In ever-peculiar North Korea, the must-have item for the country’s political elite (is there any other kind?) is the meat freezer, referred to locally as ‘geukdonggi’. As detailed in this insightful article by New Focus International, the good folks who bring reports of North Korea to the rest of the world, a geukdonggi is vital to properly store the meats and foodstuffs that are received as bribes from citizens in need of favor from the bureaucracy. And because a “minimum of a piglet in the meat’s weight or value” is required for the gift to be constituted as a bribe, the freezer units need to be of industrial size and strength. These sturdy appliances are also referred to as a ‘rich man’s safe’ or ‘bribe storage box.’

 

As sad as the existence of these household meat storage units are in a country as socially unequal as North Korea, it may be a comfort to consider that circumstances could be much worse. Whereas every well-equipped western kitchen has a salad spinner, at least North Korea’s military elite have not yet caught on to placing orders for the ultimate convenience appliance – the Ronco SpinUr – a table top, plug-and-play uranium centrifuge.

HAPPY MUTED CHINESE NEW YEAR

                 

              Less of this

          

and much less of this.

During the past “golden” week’s Lunar New Year holiday, the Chinese mainland greeted the Year of the Snake with as much hush as “hiss”. The recent campaign by the PRC’s new leadership under Xi Jinping to impose an anti-consumerism ethic on the public and tamp down rampant government corruption resulted in a more solemn, less extravagant observation of the week’s activities than recent years. Some of the more noteworthy events are the following:

 

-  Overall consumer spending for shopping and restaurants was up 15%, but that was a slower pace of growth than in the previous four years. The slowdown was particularly pronounced in the high-end restaurants, where government officials are typically entertained by those courting their favor;

 

- As this Jing Daily article discusses in more detail, the government imposed a ban on advertising of luxury products in TV, radio and billboards. The State Administration of Radio, Film and Television (SARFT) issued a statement that such advertising “promotes incorrect values and helps create a bad social ethos.” While market analysts have taken serious note of the government’s nanny-like tone on this action, they also doubt how much affect this ban will have on actual sales, since print media and more importantly online media are still allowed to push the goodies into the hands of an ever-enamored public.

 

- Sales and prices of Moutai and other fiery baijiu alcohol fell on their face like drunken party animals during the celebration week. 70-80% of annual sales of the liquor traditionally takes place during the Lunar New Year and Autumn festivals. With soft sales volume and the bursting of a price bubble that had inflated on high end baijiu in previous years, prices dropped a staggering 33%, to approximately $250 per bottle. During the period since Xi has taken power in mid November, although the benchmark Shanghai Composite index has jumped 20 percent, shares in Shanghai-listed Kweichow Moutai Co., the maker of the white spirit, have dropped 17 percent.

 

- Even the extravagant fireworks display that normally paints Beijing’s night sky with color and smoke was also toned down. The government clearly felt that reducing the wheezing and coughing of citizens choking on the already notoriously bad air took priority over eliciting louder “oohs” and “aahs” from an adoring public.

 

How long these increased moral austerity measures will last is yet to be seen. Some analysts believe that there has been a real sea change in the resolve of the new government to be more accountable towards promoting social equality. Others simply see a new year and new faces at the top, but with the same agenda and no real desire to stop an opportunity to rein in waste from slithering away.