China’s hottest in­vest­ment: Over­priced sneak­ers

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I'm re­ally an­noyed that I have to pay more for a nor­mal pair of bas­ket­ball shoes now Wang Yue

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 fu­elled 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 per cent.

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

It's 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 (US$186) for a pair.

He plans to quickly ‘flip’ them for dou­ble that on a bustling re­sale mar­ket. "If I wasn't so lucky to­day, it's pos­si­ble I wouldn't 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 idolised 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.

Ex­ces­sive spec­u­la­tion warn­ing

"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 15bn 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 minipro­gramme 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.

That's done lit­tle to de­ter peo­ple like Liu Xingfeng, a 23 year old Chi­nese stu­dent at a univer­sity in Aus­tralia who col­lected sneak­ers as a hobby for years be­fore jump­ing into it as a busi­ness this year.

He now has a loose net­work of peo­ple in the United States and Ja­pan who, for a fee, ap­ply on his be­half in on­line lot­ter­ies for new shoe re­leases, or queue out­side stores.

Fo­cus­ing on only the most sought-after mod­els such as Air Jordans or the Adi­das Yeezy, a col­lab­o­ra­tion with Amer­i­can rap­per Kanye West, Liu es­ti­mates his monthly net profit is 50,000 yuan per month.

"The sneaker mar­ket hype has ben­e­fited me a lot," said Liu.

But he ac­tu­ally avoids China's mar­ket due to the stiff com­pe­ti­tion. "There are too many peo­ple queue­ing in China. Not enough shoes."

‘Daily ne­ces­sity’

Ac­cord­ing to data-min­ing com­pany ii­Me­dia re­search, China's se­condary mar­ket for sneak­ers has passed US$1bn this year and is one of the fastest­grow­ing com­po­nents of a US$6bn global mar­ket led by the United States.

"The stock mar­ket is risky and the prop­erty mar­ket is frothy, so in­vestors are switch­ing to spec­u­la­tion in the con­sumer sec­tor," said Zhang Yi, chief an­a­lyst with ii­Me­dia Re­search.

Vol­umes are chug­ging along de­spite a Chi­nese back­lash against the NBA last month, trig­gered when a Hous­ton Rock­ets ex­ec­u­tive tweeted a mes­sage sup­port­ing Hong Kong pro­tes­tors.

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

Both also em­ploy ‘sneak­er­heads’ to in­spect shoes traded on their plat­forms to root out coun­ter­feits.

Sun Qi, vice pres­i­dent of Nice, told AFP only 0.01 per cent of sneak­ers traded via his com­pany are found to be fake.

The com­mod­i­fi­ca­tion of sneaker cul­ture doesn't sit well with every­one.

Wang Yue, 21, con­sid­ers him­self a sneaker purist, and one look at his Shang­hai flat con­firms it.

The tiny apart­ment is stacked to the ceil­ing with boxes of more than 200 pairs of sneak­ers that he es­ti­mates are worth hun­dreds of thou­sands of yuan.

A bas­ket­ball fa­natic, sneak­ers are a "daily ne­ces­sity" to Wang, who lav­ishes at­ten­tion on them, in­clud­ing phys­i­cally suck­ing the air out of bags con­tain­ing the shoes to pro­tect them in a sort of DIY vac­uum-seal.

Ac­cord­ing to him, to­day's soar­ing prices are a nui­sance.

"I'm re­ally an­noyed that I have to pay more for a nor­mal pair of bas­ket­ball shoes now," he said.

(AFP pho­tos)

This photo taken on Oc­to­ber 26, 2019, shows peo­ple wait­ing out­side a Nike store as they draw lots to buy a newly-re­leased Nike sneaker in Shang­hai

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