China’s hottest investment: Overpriced sneakers

The Shanghai branch of the central People’s Bank of China issued a warning last month about the financial risks of excessive sneaker speculation. (AFP)
Updated 11 November 2019

China’s hottest investment: Overpriced sneakers

  • Enthusiasts worldwide have fueled an expanding bubble in high-priced sneakers, often limited-edition collaborations between big names in sportswear and fashion, rappers or athletes

SHANGHAI: Forget stocks, real estate, even cryptocurrencies — China’s hottest investment nowadays may be the Nike, Adidas, and Puma basketball shoes that “sneakerheads” like Hu Huaiyuan fight to get their hands on.

Enthusiasts worldwide have fueled an expanding bubble in high-priced sneakers, often limited-edition collaborations between big names in sportswear and fashion, rappers or athletes.

But in China the craze is at fever pitch, with devotees driving soaring trading volumes on online “sneaker exchange” platforms, prompting warnings from authorities about dangerous speculation as resale profits approach 5,000 percent.

“The sneaker market is no longer just a game for enthusiasts. Speculators are flocking into the business now,” said Hu, who traveled 300km to Shanghai for the chance to buy the latest Nike Air Jordans.

It is the 23-year-old’s lucky day.

After winning an online lottery for the right to even show up at a Nike store along with around 400 others vying for limited supplies, Hu secured the right to plonk down 1,299 yuan ($186) for a pair.

He plans to quickly “flip” them for double that on a bustling resale market. “If I was not so lucky today, it is possible I would not be able to afford the shoes on the secondary market,” Hu said.

The craze’s appeal owes to two main factors. NBA stars like Michael Jordan have been idolized for years in China, where basketball is arguably the most followed sport, and the associated streetwear culture finds a huge and growing market.

And with Chinese authorities limiting individual stock market price movements to contain volatility, sneakers are embraced by younger investors seeking quick profits in a commodity they can relate to.

“If selling overpriced sneakers proves so worthwhile, why not take it as a good source of income?” said Hu.

The phenomenon is spurring quick growth in Chinese sneaker-trading platforms like Poizon, whose annual volume is around 15 billion yuan, according to Chinese tech consultancy iiMedia Research.

That is more than triple the volume of StockX, a leading US platform.

Platforms like Poizon and Nice also have attracted hundreds of millions of dollars in investment from foreign and domestic venture capital, according to Chinese media reports.

The global market is taking notice. StockX rival GOAT launched an app-like mini-program on leading Chinese messaging platform WeChat in July. StockX executives say they also are crafting China plans.

The Shanghai branch of the central People’s Bank of China issued a warning last month about the financial risks of excessive sneaker speculation, and government-controlled media portray the phenomenon negatively.

According to data-mining company iiMedia research, China’s secondary market for sneakers has passed $1 billion this year and is one of the fastest-growing components of a $6 billion global market led by the US.

However, fear of government intervention has forced app-based platforms like Poizon and Nice to take various steps to cool excess speculation.


Mexico objects to labor enforcement provision in North American trade deal

Updated 15 December 2019

Mexico objects to labor enforcement provision in North American trade deal

  • Mexico produced more stringent rules on labor rights aimed at reducing Mexico’s low-wage advantage
  • US House of Representatives proposes the designation of up to five US experts who would monitor compliance with local labor reform in Mexico

MEXICO CITY: Mexico’s deputy foreign minister, Jesus Seade, said on Saturday he sent a letter to the top US trade official expressing surprise and concern over a labor enforcement provision proposed by a US congressional committee in the new North American trade deal.
Top officials from Canada, Mexico and the United States on Tuesday signed a fresh overhaul of a quarter-century-old deal, aiming to improve enforcement of worker rights and hold down prices for biologic drugs by eliminating a patent provision.
How labor disputes are handled in the new United States-Mexico-Canada Agreement (USMCA) trade deal was one of the last sticking points in the negotiations between the three countries to overhaul the agreement.
Intense negotiations over the past week among US Democrats, the administration of Republican US President Donald Trump, and Mexico produced more stringent rules on labor rights aimed at reducing Mexico’s low-wage advantage.
However, an annex for the implementation of the treaty that was presented on Friday in the US House of Representatives proposes the designation of up to five US experts who would monitor compliance with local labor reform in Mexico.
“This provision, the result of political decisions by Congress and the Administration in the United States, was not, for obvious reasons, consulted with Mexico,” Seade wrote in the letter. “And, of course, we disagree.”
USMCA was signed more than a year ago to replace the North American Free Trade Agreement (NAFTA), but Democrats controlling the US House of Representatives insisted on major changes to labor and environmental enforcement before voting.
The letter, released on Saturday, is dated Friday and addressed to US Trade Representative Robert Lighthizer. Seade said he would travel to Washington on Sunday to raise the issues directly with Lighthizer and lawmakers.
“Unlike the rest of the provisions that are clearly within the internal scope of the United States, the provision referred to does have effects with respect to our country and therefore, should have been consulted,” Seade wrote.
Both Canada and the US House Ways and Means Committee said the deal included a mechanism for verification of compliance with union rights at the factory level in Mexico by independent labor experts.
Some Mexican business groups bemoaned a lack of clarity and conflicting information on how the rules would actually be enforced under the deal, the first text of which became public only on Wednesday.