Merryn's Blog

The cost of keeping a Chinese mistress

A mistress is harder to hide than a flashy watch as China's corrupt officials are finding out. That spells more bad news for the luxury-goods sector.

I've written here before about the possibility that the clampdown in corruption in China (such as it is) might have an impact on luxury goods sales. You can read past blog postson the matter here and here. Is it happening yet?

Forbes notes that the "back rooms of Beijing restaurants" were "strangely quiet" in the run up to Chinese New Year in February, with some of the usual government banquets actually cancelled outright. At the same time, the anti-corruption campaign has already netted a good number of thieving bureaucrats and the public are increasingly willing to "take to social media to vent their disgust with government misbehaviour."

Subscribe to MoneyWeek

Become a smarter, better informed investor with MoneyWeek.

So what's a good indicator to watch if you are following all this? It could be mistresses. The rich and powerful in China have a long history of keeping numerous mistresses and recent years have seen no change to this trend: a recent study from the Renmin University of China showed that some 60% of Chinese officials under investigation for corruption have been keeping a full-time mistress, while The Times reports on one official who was found to be keeping some 47 mistresses "a feat of romantic devotion that theoretically should be light years beyond his meager civil servants salary."

The obvious problem for officials on the take is that having a mistress is expensive (love isn't worth much to unmarried young women in modern China, but luxury goods are) and so isin itself an indicator of corruption. But there is a new problem mistresses are harder to keep secret than they once might have been.

Advertisement
Advertisement - Article continues below

As Forbes puts it, "mistresses of local officials or state company bosses cannot resist posting photos of themselves with luxury handbags, a new car or on a spa vacation. In most cases, they get the attention they crave". Internet onlookers call for their boyfriends' heads.

All this appears to be having an effect. The Times' Leo Lewis, writing from Beijing, has visited a swish granite-clad 30-story apartment block "that comes with a bit of a reputation". It is here that the mistresses of senior Communist officials are said to be "maintained in boutique studio flats".

It is a localised cluster of the mistress economy supporting a hub of hairdressers, car dealers ("outside the factory floor in Modena it is hard to imagine such a concentration of Maseratis") and jewellers. It is also in "slow collapse" as the flats are slowly vacated and "sales have evaporated in a new climate of fear." We've been wary of luxury goods shares for some time. I think we still are.

Advertisement

Recommended

Visit/519858/how-long-can-the-good-times-roll
Economy

How long can the good times roll?

Despite all the doom and gloom that has dominated our headlines for most of 2019, Britain and most of the rest of the developing world is currently en…
19 Dec 2019
Visit/investments/stockmarkets/emerging-markets/600776/indias-drive-for-economic-reform-weakens
Emerging markets

India’s drive for economic reform weakens

India's government is neglecting economic reform in favour of pushing nationalist policies
5 Feb 2020
Visit/investments/investment-strategy/600709/the-coronavirus-is-scary-but-its-irrelevant-to-your
Investment strategy

The coronavirus is scary – but it's irrelevant to your investments

The spread of the coronavirus is causing alarm around the world. And, while it could be a serious short-term threat to human health, it’s not somethin…
24 Jan 2020
Visit/519499/yet-more-fiscal-stimulus-announced-in-japan
Economy

Yet more fiscal stimulus announced in Japan

Japan's prime minister Shinzo Abe has announced a ¥13.2trn fiscal package to repair damage caused by October’s Typhoon, put new digital technology int…
12 Dec 2019

Most Popular

Visit/investments/commodities/silver-other-precious-metals/600812/buy-silver
Silver and other precious metals

You should all own some silver. Just don’t expect it to make you rich

Silver is cool, beautiful and immensely useful. But for investors it's the most frustrating of metals. Dominic Frisby explains why you should own some…
12 Feb 2020
Visit/economy/600802/money-minute-wednesday-12-february-grim-times-for-european-industry
Economy

Money Minute Wednesday 12 February: grim times for European industry

Today's Money Minute previews industrial production in the eurozone, plus the latest from America's central bank.
12 Feb 2020
Visit/investments/investment-strategy/600804/the-secret-to-avoiding-being-panicked-out-of-your-portfolio
Investment strategy

The secret to avoiding being panicked out of your portfolio

With the coronavirus continuing to occupy headlines, investors still aren’t sure how to react. But the one thing you mustn’t do is panic. Tim Price ex…
11 Feb 2020
Visit/investments/commodities/600729/the-rare-earth-metal-that-wont-be-a-secret-for-long
Sponsored

The rare earth metal that won't be a secret for long

SPONSORED CONTENT – You can’t keep a good thing hidden forever; now is the time to consider Pensana Rare Earths and the rare earth metals NdPr.
31 Jan 2020