STOCK MARKET WATCH -- Monday, 3 March 2014

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36. Chinese Austerity Drive Spreads Beyond Ferraris to Funerals

http://www.bloomberg.com/news/2014-03-02/chinese-austerity-campaign-spreads-beyond-ferraris-to-funerals.html

Zhang Hongbao, who’s run a funeral home in Shanghai for more than a decade, says he can’t recall the last time business was so dead.

“Government officials don’t dare to spend too much on funerals,” Zhang, owner of Shanghai Funeral Service (China) Co., said in an interview. “It’s the peak of the anti-corruption drive. They choose simple ceremonies, such as inviting fewer people and have quieter events rather than the noisy rituals of the past.”

Zhang, who says profits have fallen 20 percent in the past year, illustrates how President Xi Jinping’s drive to root out corruption is morphing into a broader austerity campaign that’s spreading to small businesses in the world’s second-largest economy. What began as a fight against extravagance, which put a halt to surging sales of Ferraris and Gucci bags, is now sapping demand for items such as firecrackers and greeting cards.

“There’s always collateral damage,” said Dariusz Kowalczyk, Hong Kong-based strategist at Credit Agricole SA. (ACA) “These are negative side effects that nobody wanted but it’s a big economy and making one rule for a market that size means that you cannot take care of every nuance and it’s unavoidable.”