It takes more than just guesswork
August 11, 2010, Wednesday
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Print Edition
Print Edition
PRICE speculation and market manipulation are not guesswork only.
In a report by the Oriental Morning Post last Monday, a man identified by the pseudonym Zhang Hua told reporters that he had invested 3 million yuan (US$442,935) to buy ginger under a deal with an unidentified "team leader."
He said he had actually not set eyes on the ginger he bought, but the investment earned him a big profit. When he joined "the team" six months ago, each kilogram of ginger cost only 4 yuan. Now ginger is being sold for 9 yuan a kilogram.
"I will wait until the price triples and then sell all my ginger," Zhang said. His profit-making mode of operation is simple: He gives money to the team leader, signs a contract, and then waits.
Zhang said he had investments in several industries, but the ginger business was the easiest of them all where lucrative profits are concerned.
"I don't know if there is any better and safer business than this," Zhang told reporters. "We have many new partners joining us. It operates much like a private equity fund."
The "team leader" was described by Zhang as a man who made his first fortune last year by buying up garlic and hoarding the produce in warehouses. This year, the "team leader" thought the risk of investing in garlic was getting too great, so he took garlic profits of nearly 10 million yuan, as well as money from downstream investors like Zhang, and moved into ginger.
"The team leader is responsible for trading the ginger," Zhang told reporters. "He does not need to go to the market directly. He has a business ring, and buyers or exporters come to him."
People like Zhang may not be a minority this year, said Fudan's professor Sun.
"Such investments aren't illegal so far," he said. "But if not supervised and controlled, they could expand into more sensitive categories of products and create disorder in the market."
China will fine individuals and companies up to 2 million yuan for circulating misleading or false information about prices, the National Development and Reform Commission said in mid-July, after setting up two offices to control monopolistic behavior as part of efforts to curb price manipulation and profiteering.
In case of serious offenses, those who break the price regulations will lose their business licenses, risk confiscation of their gains and receive fines up to five times their profits, the commission said.
The anti-profiteering commodity measures have been issued for public comment through August 13. After that date, the measures will be submitted to China's legislature.
Some analysts said volatility in the prices of garlic, ginger and other soft commodities may continue to crop up periodically unless China allows greater diversity of channels for investors.
In a report by the Oriental Morning Post last Monday, a man identified by the pseudonym Zhang Hua told reporters that he had invested 3 million yuan (US$442,935) to buy ginger under a deal with an unidentified "team leader."
He said he had actually not set eyes on the ginger he bought, but the investment earned him a big profit. When he joined "the team" six months ago, each kilogram of ginger cost only 4 yuan. Now ginger is being sold for 9 yuan a kilogram.
"I will wait until the price triples and then sell all my ginger," Zhang said. His profit-making mode of operation is simple: He gives money to the team leader, signs a contract, and then waits.
Zhang said he had investments in several industries, but the ginger business was the easiest of them all where lucrative profits are concerned.
"I don't know if there is any better and safer business than this," Zhang told reporters. "We have many new partners joining us. It operates much like a private equity fund."
The "team leader" was described by Zhang as a man who made his first fortune last year by buying up garlic and hoarding the produce in warehouses. This year, the "team leader" thought the risk of investing in garlic was getting too great, so he took garlic profits of nearly 10 million yuan, as well as money from downstream investors like Zhang, and moved into ginger.
"The team leader is responsible for trading the ginger," Zhang told reporters. "He does not need to go to the market directly. He has a business ring, and buyers or exporters come to him."
People like Zhang may not be a minority this year, said Fudan's professor Sun.
"Such investments aren't illegal so far," he said. "But if not supervised and controlled, they could expand into more sensitive categories of products and create disorder in the market."
China will fine individuals and companies up to 2 million yuan for circulating misleading or false information about prices, the National Development and Reform Commission said in mid-July, after setting up two offices to control monopolistic behavior as part of efforts to curb price manipulation and profiteering.
In case of serious offenses, those who break the price regulations will lose their business licenses, risk confiscation of their gains and receive fines up to five times their profits, the commission said.
The anti-profiteering commodity measures have been issued for public comment through August 13. After that date, the measures will be submitted to China's legislature.
Some analysts said volatility in the prices of garlic, ginger and other soft commodities may continue to crop up periodically unless China allows greater diversity of channels for investors.
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