The Crackdown on China's Corrupt Gifting Economy, with Junheng Li
Junheng Li, Founder and Head of Research at JL Warren Capital, has a unique expert's perspective on both Chinese and American markets. That's because she was born and raised in Shanghai though later moved to the United States to attend college. Lessons learned in both countries have helped Li make a name for herself on Wall Street as a shrewd financial analyst specializing in Chinese investments. Her book, Tiger Woman on Wall Street, chronicles her life while also describing her investment strategy.
As part of her Big Think Interview, Li discusses the degree to which the Chinese government has sought to crack down on corruption by targeting the country's infamous "gifting economy." Basically, the culture of corrupt gift-giving had gotten so out of control that one could spot its effects in the stock prices of companies such as Rolex and Omega. Two years ago, the Chinese government launched an anti-corruption campaign. Li explains that not many people expected it to reap results. Its success, then, has been a very pleasant surprise:
"Everyone thought it was going to be short lived but it's not. It's been two years now and it's still deepening and reaching all sectors in the economy. Originally we thought it was going to be just a purge in the military, in the government. Now it seems like it affects pretty much corporations in all sectors..."
As the government maintains pressure, the gift-givers have either been squeezed out or forced underground. What this has done is instill a renewed sense of hope and confidence among citizens while also communicating to the elite that bad behavior will not be tolerated. True to her calling as a market analyst, Li infuses her explanation with a forecast that spells bad news for luxury goods.
"Going forward I think we will see more contraction in luxury sales, not only just bags and Swiss watches but also we'll continue to see that in Macau VIP rooms, luxury autos, luxury banquets, luxury outings. So that would, to a degree, affect five-star hotels in China, expensive restaurants in China as well. If you go to any sort of conferences right now, I mean that's a really heated topic, everyone's trying to gauge the magnitude of this campaign and how long it's going to last."
For more on China's persistent anti-corruption campaign, watch this clip from Junheng Li's Big Think Interview: