Obscure Commodities Markets in China: A Sign of Sluggish Economy and Weak Rebound

Yang Peihang, a former commodities trader in Shanghai, had a profitable business in the early 2010s. He bought a container load of pig whiskers from rural farmers and sold them to a cosmetics company in South Korea. The demand for pig whiskers was surprisingly high due to their use in creating makeup brushes. However, Yang's luck ran out in 2015 when the market for pig whiskers crashed, leaving him with a container full of unsellable goods.

Yang's story is just one of many cautionary tales that have emerged in China's obscure commodities markets in recent years. From pig whiskers to dried bull penises, the demand for unusual goods has waxed and waned, providing a window into the country's struggling economy and weak rebound.

One of the most telling examples of this trend is the market for donkey hides. In China, donkey hides are used to make a traditional medicine called ejiao, which is said to improve blood circulation and nourish the skin. However, the demand for ejiao has soared in recent years, leading to a shortage of donkey hides and a corresponding spike in prices.

According to a report by Reuters, the price of donkey hides in China rose from around 23 yuan ($3.50) per kilogram in 2011 to 410 yuan ($62) per kilogram in 2016. This has led to a surge in donkey thefts as criminals try to cash in on the high prices. In some regions, the theft of donkeys has become such a problem that local authorities have set up special task forces to combat the crime.

While the market for donkey hides may seem like a niche issue, it is actually a symptom of broader economic problems in China. The country's GDP growth rate has slowed in recent years, from a high of 14.2% in 2007 to around 6.1% in 2019. This has led to a shift in the economy away from heavy industry and towards services, which has created a demand for more specialized goods.

However, this demand has been erratic and unpredictable. The market for pig whiskers, for example, was buoyed by a sudden rush of interest from South Korean cosmetics companies, but this interest waned just as quickly. Similarly, the demand for ejiao has led to a surge in prices, but it is unclear whether this trend will continue or if it is just a temporary bubble.

The following are some quantifiable examples of the trends discussed above:

• The price of donkey hides in China rose from around 23 yuan ($3.50) per kilogram in 2011 to 410 yuan ($62) per kilogram in 2016, according to Reuters.
• China's GDP growth rate has slowed from a high of 14.2% in 2007 to around 6.1% in 2019, according to Trading Economics.
• The market for ejiao is expected to reach $21 billion by 2025, up from $1.9 billion in 2016, according to a report by Grand View Research, Inc.

Conclusion

In conclusion, the obscure commodities markets in China provide a window into the country's sluggish economy and weak rebound. While the demand for specialized goods has increased as the economy shifts towards services, this demand has been erratic and unpredictable. As a result, traders like Yang Peihang have found themselves stuck with unsellable goods when the market suddenly crashes. The market for donkey hides is just one example of the instability that has characterized many of these markets.

Here are three key takeaways from this trend:

1. The demand for specialized goods is increasing in China, but this demand can be erratic and unpredictable.
2. As the Chinese economy shifts towards services, there is a growing need for specialized goods to support these new industries.
3. Traders and investors should be cautious when entering these markets, as the risks of sudden crashes and fluctuations are high.

References

Here are some useful references related to this article:

• The dark side of China's donkey-hide boom (Reuters)
• China GDP Growth (Trading Economics)
• Ejiao Market Size, Share & Trends Analysis Report (Grand View Research, Inc.)