Has China's Economy Finally Jumped the Shark?

In a recent Letter from China, Evan Osnos recalled Japan’s excesses in the late 1980s, and wondered whether a Chinese tycoon’s attempt to buy a large swathe of north-eastern Iceland might mark a similar pre-crash point on China’s trajectory. Tsinghua professor Patrick Chovanec looks at photographs of a Harbin pharmaceutical SOE’s surreally opulent new building in a similar light. (Click through for pictures.)

The gold-encrusted hallways, marble foyers, and imposing granite frontage are not from Versailles, or the Vatican, or even Caesar’s Palace in Las Vegas. They are from the newly completed corporate headquarters of state-owned Harbin Pharmaceutical, in northeast China. No word on exactly how much the literally palatial offices cost to construct, but the mind boggles. One prominent journalist from Chinese state TV severely criticized the company for its garish use of funds, explicitly comparing it to the Palace of Versailles, but some netizens posting online defended the monument as a natural expression of China’s prosperity:

What happened…? This is very normal. What’s the big deal? This is what the healthy development of a business looks like. So Chinese state-owned enterprises aren’t allowed to do this? I support Harbin Pharmaceuticals… Hope there will be even more enterprises like Harbin Pharmaceuticals…

For the last several months, I’ve been just waiting for the moment when somebody rolls up a big wad of 100 Renminbi notes into a cigar, sticks it in their mouth, and lights up. In the meantime, I’m going to have to settle for this as the next best thing.

Business Insider (via Stan Abrams) finds a less gloomy timeline on which to place these stories: an HSBC luxury market research report suggests that China is simply passing through a normal “Show Off” phase of “luxury evolution”:

According to HSBC:

The urge to splurge, China at the ‘show-off’ stage

In Chinese and Russian communist societies, individual property was not allowed and private wealth was traditionally suspicious. With the liberalization of the economy, a new class system was created where your place on the ladder may depend on how much money one earns, and owning luxury goods can help display the level of one’s wealth.

The report cites a book that details the five stages of luxury evolution in Asian countries from “subjugation” to “way of life,” and China is smack dab in the middle at “show-off.” (In comparison, India is still moving out of “subjugation,” where people are deprived and start to build a desire for luxury brands. Japan has totally evolved to “way of life.”)

Uncertainty still surrounds the photos, which have been variously described as showing offices, an employee recreation centre and, according to an anonymous source at the company itself, an art museum. From the AFP:

The Beijing Business Today newspaper quoted an unnamed spokesperson for the company as confirming the pictures were genuine, but said they were of an art museum located in the same building as the firm’s offices.

“The design and decoration of the office’s section are very simple. But we hoped the design of the museum would have some sense of art,” the spokesperson was quoted as saying.

However, photos of the museum posted on the company’s website showed an area of white-painted walls and brown wooden floors, and did not look anything like the opulence seen in the pictures released online.

Sources:

Après Nous, Le Déluge – Patrick Chovanec
China Has Entered The “Show-Off” Stage Of Luxury Evolution – Business Insider
China state firm’s sumptuous office causes outrage – AFP

September 9, 2011 2:10 PM
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Categories: Economy, Society