Who Wants to be a (Dead) Trillionaire?

This blogger is heading off for a two week vacation. Prior to that, here is a light-hearted piece on Hong Kong’s ritual of burning fake money and paper goods as a way of honoring their ancestors. As shown by the trillion dollar note below – US$6.50 buys you one hundred of these babies – inflation has clearly gotten to be even more a problem in the spirit world than in the sentient one. In addition to large denomination notes, homage-payers can buy paper renderings of iPads, DVDs, flat-panel TVs and sports cars. The afterworld is supposed to be a realm of higher consciousness. Be that as it may, salvation seems to come at a frighteningly high price.

For bribes and luxury items in a hyperinflationary underworld

 

 

WSJ: In Hong Kong, Inflation Worries Spook the Spirit World

Deep in China's spirit world, an inflation crisis is brewing that would give central bankers chills.

For hundreds of years, Chinese have burned stacks of so-called "ghost money" for their ancestors to help ensure their comfort in the afterlife. The fake bills resemble a gaudier version of Monopoly money, emblazoned with the beatific-looking image of the Emperor of the Underworld.

Traditionally, paper money burned in China came in small denominations of fives or tens. But more recent generations of money printers have grown less restrained. The value of the biggest bills has risen in the past few decades from the millions and, more recently, the billions. The reason: Even Hong Kong's dead try to keep up with the Joneses, and their living relatives believe that they need more and more fake bucks to pay for high-cost indulgences like condos and iPads.

This year, on the narrow Hong Kong streets that are filled with shops that specialize in offerings for the dead, there appeared a foot-long, rainbow-colored $1 trillion bill. "What we have right now is hyperinflation," says University of Hong Kong economist Timothy Hau. "It's like operating in Zimbabwe."

The inflation problem is expected to worsen during this year's Hungry Ghost festival, when the gates of the underworld are believed to open and ghosts are allowed to wander the earth. For the next few weeks, residents across the city are staging traditional opera performances to entertain their supernatural guests (leaving the front row of seats empty for ghost spectators), cooking elaborate meals of roast meats for their enjoyment and burning wads of fake money on the sidewalks in their honor.

The inflation in the underworld mimics what is happening above ground. In recent years, both Hong Kong and mainland China have felt the impact of higher prices. With its rising cost of food and housing, Hong Kong in particular has its hands tied in fighting inflation, thanks in large part to its currency peg with the U.S. dollar, which keeps the city's interest rates low.  

The local funeral trade is feeling the pinch as well. In Hong Kong Island's rapidly gentrifying western reaches, nearby the city's ginseng and shark's fin sellers, is a row of half a dozen funeral shops. Their shelves are stacked high with gaily colored rows of dim sum baskets, air conditioners and DVD players, all made out of paper and intended to be burned as offerings. Situated adjacent to a hospital and several coffin shops, these stores all offer items for the needy dead.

The shops have been around for decades, but one is shutting down next month. "The rent is so expensive, and it's hard for us to carry on," says the 62-year-old manager, Tony Tai.

"Inflation is everywhere, so of course it happens in the underworld too," says Li Yin-kwan, 42. The $1 trillion bill is the most popular note in her shop, she says, "because it allows the ghosts to buy many things, such as a fancy car and a big house."

Still, she said that there is also a place for burning smaller-value bills. "The ghosts need spare change to buy daily necessities, too," she says, such as clothes and food. On a recent Friday, all the trillion-dollar bills in her shop and the shops next door were sold out. "I'm sorry," Ms. Li said to one customer. "There are still some $100 billion notes left."

Vendors like Ms. Li point to other worrying signs of an underworld economic crisis, including the proliferation of paper credit cards from the Bank of the Underworld—some adorned with pink diamond motifs and VIP stickers, and others colored mint green like American Express. Other symptoms of a splashed-out consumer economy are afoot, including paper iPads, flat-screen TVs with 3-D glasses and sports cars.

Economists say the problem is that the underworld has no control over how much currency enters its economy. The more "ghost money" burned, the more inflation continues to zoom upward. "Inflation is everywhere a monetary phenomenon," says Mr. Hau, citing the late economist Milton Friedman. "It's the money supply that's causing it."

He says that like Zimbabwe, the underworld should dollarize its economy and begin accepting mainly U.S. currency. Few people, he argues, would burn real dollars, reducing the amount of cash flowing into the spirit world.

Kenny Cheung, manager of 50-year-old funeral service company Cheung Kee, prefers to burn faux glasses of milk tea and Western suits made of paper for departed ancestors, such as his grandfather, because they are things he knows they would miss in the afterlife. "If your heart is strong, there's no need to burn so much money," he says.

While he does sell $1 trillion bills (HK$50, or about US$6.50, gets you a stack worth $100 trillion in underworld currency), as well as ghost money closely resembling U.S. greenbacks, he draws the line at paper credit cards. "I don't think it's a good habit for the living or the dead," he says.

Hong Kong's central bank, the Hong Kong Monetary Authority, says it is powerless to address underworld inflation because it lacks the regulatory authority. "As a result, [the HKMA] does not collect monetary statistics on the amount or value of currency in circulation in the 'afterworld' or seek to regulate its issuance activities," said a spokeswoman, who apologized for not being funnier in her reply.

According to Chinese tradition, burning ghost money—which in many ways is more of a cultural than religious practice—is a vital part of ancestor care. The traditional view of the Chinese afterlife is that it closely mirrors the real world, with its own otherworldly bureaucracy full of officials that need careful cajoling—not to mention bribes.

"We've got corruption in the underworld as well," says Maria Tam, Chinese University of Hong Kong anthropologist. For example, she says, if you burn a paper house for your ancestors, you have to burn money as well. "Otherwise some petty bureaucrat down there will probably take it for their own," said Ms. Tam. "So you need money to bribe them."

Cash is needed for other pursuits as well. "In the underworld, they also need money to gamble," says Mr. Cheung. "No money, no fun."

Hitched, Gangnam Style

Saying “I love you” with Seoul

Thanks to the Korean cool factor of TV dramas and K-pop stars such as Psy, the desire by mainland Chinese to capture the reflected glow of Korean sophistication is extending to wedding ceremonies. Whereas many Westerners might view Korean weddings as an assembly line of canned ceremonies complete with faux-European kitsch and backdrops (with the occasional white horse cantering on the rooftops of Seoul’s wedding palaces), an increasing number of Chinese see it as a touch of class compared to what is available at home. Details of these cooler-than-thou nuptials are in the article below.

Image industry weds Korea cool to China's new rich

South Korean wedding companies woo rich Chinese eager for touch of Seoul's style sense

By Elizabeth Shim
Associated Press
Aug 12, 2013

http://finance.yahoo.com/news/image-industry-weds-korea-cool-071027582.html

SEOUL, South Korea (AP) -- Standing by a French chateau's window, the bride-to-be glows in the afternoon sun as she gazes into her fiancé's eyes. This Chinese couple's fairytale moment, however, isn't unfolding at a Bordeaux estate.

The 20-something Beijing lawyers and fans of South Korean pop idol Rain are part of a small but growing number of affluent Chinese for whom the craze for all things South Korean means flying to Seoul for the weekend to have wedding pictures taken.

China is the source of one quarter of all tourists to South Korea, and a handful of companies in South Korea's $15 billion wedding industry are wooing an image-conscious slice of the Chinese jet set happy to drop several thousand dollars on a wedding album with a South Korean touch.

The draw for many of the well-heeled Chinese isn't Seoul's ancient palaces or the fiery cuisine. It's an elegant urban style exemplified by Gangnam, the tony Seoul district made globally famous by South Korean rapper PSY's "Gangnam Style." Helping shape that image is the popularity of South Korean cosmetics and fashion and the many South Korean stars whose looks are widely copied in China.

"The style in South Korea is more sophisticated and cuter than what we have in China. We came here because South Korea is the leader in fashion and makeup," said the bride-to-be, Yang Candi, as two stylists fussed over her hair with a curling iron and giant hair clips during a recent photo shoot.

South Korea's tourism ministry estimates that more than 2.5 million Chinese visitors spent an average of $2,150 per person in 2012, more than any other nationality. That's helping companies such as iWedding, which is the largest of the South Korean wedding planners hosting Chinese tourists, to flourish.

Every month for more than a year, iWedding has done business with 50 to 60 Chinese couples, the company said, including the Beijing attorneys whose love of South Korean TV shows and music brought them to Seoul.

A South Korean competitor, Design Wedding, recently partnered with a Chinese company in Shanghai and has photographed more than 50 Chinese couples since May. Chuka Club, another South Korean wedding planner, said it gets Chinese clients even though it doesn't advertise on Chinese websites like rivals iWedding and Design Wedding.

"Chinese look up to South Korea for its sophisticated urban culture, style and beauty," said Song Sung-uk, professor of South Korean pop culture studies at the Catholic University of Korea in Seoul. "Rather than visiting traditional palaces or shopping for antiques, they would rather go to Gangnam to experience state-of-the-art shopping malls."

Song said South Korea, which built the fourth largest economy in Asia from the rubble of the 1950-53 Korean War, is synonymous with the good life that middle-class Chinese aspire to. South Korea's pop culture plays a big part in cultivating that image.

"I always wanted to come here, especially after watching South Korean TV shows," said the groom-to-be, Chen Jingjing, his face gleaming with liquid foundation, his eyebrows carefully contoured.

The couple said they had high expectations for their trip and were excited about the prospect of glamorous photos mimicking the pampered lifestyles of their favorite South Korean celebrities. The trip, they said, would also give them bragging rights at home with their friends and family.

After nearly three hours of hair, makeup and frequent amorous glances, Chen and Yang, dressed in wedding white, are chauffeured to a nearby photo studio where they spend the next eight hours striking poses before facades resembling cobblestoned streets or Loire Valley estates. The continental European backdrop is a favorite of Chinese visitors and South Koreans. That likely stems from the popularity of Western-style bridal gowns and tuxedos; many wedding planners began thinking that those European outfits looked better when photographed in front of a European set.

The heart of the day for Yang and Chen was overseen by a nimble South Korean photographer who orchestrates the eight- hour photo session with an air of Gangnam cool, cooing enthusiastically to get the couple's poses just right. Other helpers rushed to adjust Yang's hair or dust off Chen's lapel as mellow South Korean pop tunes wafted from speakers embedded in the ceiling.

The photographs are arranged in a leather-bound album, part of a South Korean package for couples that includes transportation, doting assistants and a hotel option, according to Yu Mi-ra, a Chinese-speaking South Korean coordinator at iWedding. The service costs $2,000 to $4,000.

Yu said the reason cosmopolitan Chinese come all the way to South Korea for wedding pictures is a higher quality photography and makeup service than they'd get in China.
But that doesn't mean expectations are always met.

While Chen and Yang seemed at ease with the attention — smiling at the photographer's attempts to speak Chinese and generally operating like celebrities accustomed to paparazzi and the staged glamour of red carpet events — six hours into the photo session, Yang's smile disappears. She is unhappy with the photographs.

"My cheekbones are sticking out," said Yang after looking at the pictures through a camera viewer. "We came all the way to Korea to look our best. But these pictures are plain. I'm a little disappointed."

Yang's South Korean translator and assistant eventually persuade her to go on with the photo shoot. And Yang again bats her fake eyelashes and smiles for the camera. At the close of the day, she seems generally pleased.

"Everyone is nice. They must be tired too," she said.

Bankers As Friends, Not Fodder

Show me love, take me home to meet your ma ma.

Okay, this is the posting that probably gets me hung up by my thumbs and flayed alive. This efinancialcareers.com article asserts that the only region in the world where bankers are still held in high esteem is in Asia, particularly Hong Kong, China and Singapore. The reasons given are as follows:

 1) A no-fault financial crisis – this time around, the local banks didn’t cause problems, and the local governments didn’t bail any of them out

    2) Bash someone else instead – there are plenty of other villains, namely real estate developers, milk product manufacturers, chemical plant operators etc.

    3) Bankers are heroes – they work hard, are well educated, well dressed, provide loans to people and make a good living.

    4) Bankers behave well at play… – they are not the party animals and are not as ostentatious as their Western counterparts

    5) …and at work – ditto

    6) Just another rich guy – see 2) above

    7) Bankers deserve it – see 3) through 5) above

    8) Greed is good – making money, and lots of it, is still a prime objective for much of East Asia’s population.

    9) A meeker media – The local media is not as free as in the West, and, with a few exceptions, is less focused on reporting on personalities.

My commentary on each of the above stated rationale:

    1) I generally agree, although those with memory back to the Asian financial crisis of 1997 and the Korean credit card crisis of 2003 may beg to differ. Still, banks back then were seen as weak, not evil.

    2) I agree. A variety of scum and short-sighted profiteers abound in Asia.

    3) I partially agree. Banks in Asia have done a great deal of good in the past two decades providing growth capital to businesses and individuals. However, there have also been hundreds of billions of dollars of investment products placed with the public over the past several years. If the market turns seriously sour and investors start losing heaps of money, the pitchforks are bound to come out in large numbers, as they did during Hong Kong’s Lehman Brothers Minibond crisis following 2008. Also, bankers who own portfolios of distressed assets are never known to be angels of mercy and charity.

    4) Huh? I think that the penchant for showy wealth is as prevalent in Asia as anywhere else.

    5) Ditto.

    6) I general agree. There is plenty of nouveau riche money that has been made through real estate, stock market investments, and business ownership. Much of that wealth is conspicuously displayed. Bankers are hardly alone in flaunting it.

    7) This is a tough call. Banker pay is a controversial topic globally, and Asia is no exception. Bankers are paid not simply according to the long hours that they put in and their intellectual horsepower, but to what profit numbers they can successfully put beside their name, as well as to the age-old principles of supply and demand. Simply speaking fluent Mandarin has never commanded the pay premium that it has over the past 10-15 years.

    8) I general agree, but with a heavy sigh. Money is still a powerful measure of success in Asia. I am reminded of a recent story whereby a man attended a presentation in China by private equity firm KKR. He brought his pre-teen son along and declared to the lad, “pay attention, this is the profession I want you to be in when you grow up.”

    9) This is only partially true, on a case by case basis. This is generally true in countries such as China and Singapore, as well as smaller countries where the media is heavily influenced by tycoons. However, in other countries such as Hong Kong, Korea and Taiwan, the local press can be as nasty as anywhere.

In short, I would agree that Asian banks are run more conservatively, more highly regulated and are less sophisticated than the large global investment banks. However, one cannot ignore that the relatively favorable economic climate in East Asia has muted the general public disgruntlement towards “fat cat” bankers. That charitable view may change in a heartbeat in the next crisis. I will be watching with keen interest to see how public sentiment turns going forward. That’s assuming that I’m not hanging from a rope soon after this article is posted.

Versace Hotel in Macau – Piling on the Glitz

Trading up to classy from clutzy

As reported in this Washington Post article, Versace and Macau’s SJM (founded by Stanley Ho) have agreed to build a Versace branded luxury hotel on the Cotai Strip. It will have 2,000 rooms and 700 gambling tables. For SJM it’s a much-needed touch of class. For Versace, it may the only place in the world where its designs will look positively subdued.

Bo and his Wife - Irreconcilable Differences

Child of a Lesser God

The global media has lit up with the announcement of Bo Xilai’s trial on Thursday, August 22. By all accounts, it will be a quick, pre-ordained proceeding, with the charges already set to fit the amount of filth that the Chinese government is willing to launder in public. Bo himself has been part of the damage control maneuverings, since there is an element of MADness, or “mutually assured destruction”, between him and other Chinese political leaders.

 

This Wall Street Journal article offers an interesting twist to the story – that his already convicted wife (she of the poisoned chalice that killed Neil Heywood) may be a key witness against him. Angered, Bo has threatened to divorce her. However, she likely has more powerful motivations than keeping up the charade of a once blissful matrimonial union with Bo. Like any good mother, she may be cooperating in order to ensure protection for her (and Bo’s) son, who is studying law at Columbia University in the fall. There is the old supposition that the rich are different from the rest of society. If this trial proves anything, it may be that this rule holds true amongst the elite in China. It’s just a shame that this spectacle, which would be fodder for juicy tabloid drama in an open society, will probably play out like a rock concert heard through ear muffs.

Banking’s Blood Relationships

Family album as resume.

As reported in this New York times article, JP Morgan is being investigated by the US SEC’s anti-bribery laws in relation to its practice of hiring the offspring of senior Chinese government officials into their Hong Kong office in order to improve their ties to Chinese clients and win business. Focus in the article and investigation relate to the daughter of an official of the China Railway Group and the son of the chairman of the China Everbright Group. JP Morgan has garnered a good share of lucrative business from these entities over the past several years.

 

It’s interesting that the investigation is coming to light now, even though the practice of hiring “princelings” and other relatives of powerful political and business leaders in China and other countries is a well-trodden path to winning deals. Almost every major bank over the past decade has augmented the ranks of their professionals with the well-connected. Furthermore, it remains to be seen whether the US government can prove that such hiring practices violates bribery and corruption acts. A key legal question is how “qualified” the hired person is to perform the task for which (s)he is being remunerated, and whether it is reasonable to think that a person with a particular professional background is capable of winning big deals other than through unethical or illegal means.

 

In any event, similar with the Bo Xilai case, there could be some interesting investigations and media reporting yet to come. This topic is also a key theme in this reporter’s forthcoming second novel, a prequel to Nothing Gained. Stay tuned...

Slowing Growth of “Chillionaires”

Moving out of the fast lane.

Here is a link to a just-released Jing Daily report on Chinese millionaires in 2012. It contains interesting graphs and statistics. Some notable takeaways are as follows:

• The number of new Chinese millionaires grew by only 3% in 2012, the slowest pace in five years.
• There are now over one million “Chillionaires” on the mainland.
• The three cities with the highest number of millionaires are Beijing, Guangdong, then Shanghai.
• The number of super-rich (net worth over $16 million) grew by only 2%. These individuals are mainly concentrated in Beijing.
• Wealth growth happened more quickly in some second tier cities. Tianjin had 11% growth, while Henan had 8%.
• Half of the millionaires made their money through their own businesses. 15% each were from real estate and stock market investing. The remaining 20% were from high-salaried professionals, including bankers. Bravo for entrepreneurialism!