Second-Tier Spotlight: Qingdao's Jade Fever Fueling Concerns

    With many affluent Chinese purchasing more gold, jade and jewelry as alternative investments or for enjoyment in recent years, jade has again become a hot topic of discussion.
    Jing DailyAuthor
      Published   in Finance

    Is A Bubble Forming In China's Jade Market?#

    Qingdao has become a hot market for trading jade.

    Jade's allure as a symbol of tradition, culture, power and wealth has made it popular in China for centuries, but with many affluent Chinese purchasing more gold, jade and jewelry as alternative investments, or simply for enjoyment, in recent years, jade has again become a hot topic of discussion.

    As Jing Daily has previously noted, the price of high-quality jade from China's western Xinjiang Province has risen ten-fold over the past decade, and now can fetch up to US$3,000 per ounce. Chinese collectors now scour the globe for rare and historical pieces of jade, often spending millions for particular lots at auction. Last spring, a jade seal previously owned by Qing emperor Qianlong (1711-1799) -- one of the most popular historical Chinese emperors among modern collectors -- sold for a record-breaking $12 million to a Chinese buyer.

    Over the past several years, China's jade frenzy has spread to (and boomed in) Qingdao, capital city of coastal Shandong Province, a city best known for its most famous export, Tsingtao Beer. According to Sina Collection, as a result of rising raw material and labor costs, as well as an infusion of hot money into the Qingdao jade market, a jade accessory purchased by one local collector in 2008 for 5,000 yuan (US$770) is now worth around 20,000 yuan ($3,000).

    Over the last decade, prices for different types of jade in Qingdao have risen dramatically. In the last two years, due to increased demand and stricter export controls by manufacturers in Myanmar (Burma) of high-quality jadeite, prices for raw jade and jadeite have risen almost uncontrollably. While it's hard to discern whether the greater scarcity of jade on the market or pure speculation is more to blame, one salesperson at a jade market in Qingdao noted that 70 to 80 percent of her customers are buying jade only for investment purposes.

    Hetian jade has been popular in China for more than 2,000 years

    What makes the jade market even more muddled is its segmentation, as some classifications of jade are more sought after by collectors than others. For example, Hetian jade (often referred to as China's "national jade") has shot up in price as collectors have pounced on any inventory that has become available. This has had knock-down effects for other forms of the precious stone, such as Russian White jade, which has also seen a massive leap in price. Another type, Yellow Dragon jade has seen prices increase ten-fold in only three years, driven in large part by the collecting fever seen in Qingdao. A carved piece of Yellow Dragon jade purchased for 10,000 yuan ($1,540) in 2008 by the well-known Qingdao collector, Liu Yilin, is now worth 100,000 yuan ($15,400).

    However, every investment has risks, and naturally many are wondering whether China's rekindled love affair with jade is creating a bubble. As Ren Weiqin, chairman of the Qingdao Jade Collection and Appreciation Research Center, recently pointed out, potential collectors need to be aware that only the finest jade has any investment value. Ren added that the ever-changing price of jade boils down mostly to investor speculation and oscillating scarcity of raw materials, and that investors need to do their research and make sure they don't enter the market blindly. Unlike, for example, the diamond market, no clear jade standards yet exist in China, meaning it's still "buyer beware."

    But don't expect to see the jade market cool down dramatically any time soon. As we noted in a previous Jing Daily article on Chinese jade investment,

    Whether jade continues to gain popularity as an investment vehicle — or if a bubble is indeed forming that will eventually shake out the market — one thing that is certain is that antique jade will likely remain popular among Chinese collectors at auction.

    Previously in Jing Daily's "Second-Tier Spotlight"#

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