2009-12-02

Forget Gold, Buy Garlic

Garlic beats gold as China's hot new asset
Shao Mingqing was a jobless young man from Shandong province with only a junior high school diploma when his luck turned around a few months ago with the skyrocketing price of garlic.

The 22-year-old Shao now drives an 180,000-yuan Toyota he bought with the money he made on the garlic market. Shao's face was lit up with joy when he talked about his recent success.

"I borrowed some money and decided to buy 100 tons of garlic at the price of 3.2 yuan per kilogram (kg) in September," Shao said. "I made a profit of 400,000 yuan from selling it at the price of 7.2 yuan a month later."
Is there a garlic bubble?
The soaring garlic prices are creating a frenzied mood among market speculators as they seek new opportunities to buy and store as much garlic as possible, betting the price will surge to a new high in coming days.

Rich coal mine bosses, according to some media reports, have also joined the garlic market, hoping to reap huge profits.

Some real estate speculators, who have earned big money in China's overheated property market, also are gambling on garlic, according to media reports.
Yes, there is a garlic bubble. The article mentions possible demand due to the health effects of garlic (garlic heavy dishes were popular during SARS) in light of H1N1 fears. But prices also fell to 0.08 yuan per kg last year, roughly the equivalent of $0.01, so farmers cut back production.

Still, I'm going to say that this is a decent indicator that China has plenty of credit.

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