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Traders step into sneakers to make money

By Liu Jianna | China Daily | Updated: 2019-10-25 07:50
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Throughout the ages, few stories have been as thrilling and appealing as rags-to-riches tales. The reason: people across the social divide have since times immemorial wanted to ameliorate their condition, sooner rather than better. And such stories have rarely been in short supply.

One such story has gone viral in this age of information, although it is in an area not so well known even to finance experts: sneaker trading. The wealth-creation myth surrounds an undergraduate, who is said to have supported himself, even achieved economic independence by trading in limited-edition sneakers.

People have even been urged to take a share in this business boom: You have missed out on the opportunity to get rich by buying houses in a bid to cash in on the property market boom, or trading in stocks in the bullish stock market or hoarding bitcoins as part of the cryptocurrency craze; to become rich, therefore, capitalize on the "sneaker craze".

Sneakers, by definition, are a type of casual shoes, more precisely, designed for outdoor activities; they are made of canvas or synthetic material with rubber of polyvinyl chloride (PVC) soles.

Indeed, the sneaker trading business has maintained "explosive growth" over the past few years. A dozen of sneaker trading platforms have emerged, registering robust daily transactions of shoes sold at astonishingly high prices. Among which, the trading volume of Du APP, an industry leader, is forecast to reach 6 billion yuan ($847 million) this year. In fact, a pair of highly craved limited-edition sneakers could easily fetch many times more than the official sale price.

Lured by the large profit margin, capital has poured into the sneaker trading sector. As a result, the sneaker reselling market is increasingly becoming a speculation hotspot-no different to the stock market. Various trading indexes such as Air Jordan index, Nike index, and Adidas index are created for buyers to track the rise and fall in prices. And traders could buy or sell without even seeing and securing the footwear in the first place.

Most probably, the traders cashing in on the sneaker trading boom have no idea of the sneaker culture or craze. Nor do they care that the real fans of the casual shoes could be deprived of the chance to get hold of a pair that they so earnestly crave for.

Seemingly, sneaker manufacturers' hunger marketing is the root cause of the emerging problem, and trading platforms and the few first-comers are the only ones that profit from this booming market while the real sneaker fans are made "victims" along the way.

As even those more ignorant of the inherent risks in the business have been drawn to the sector, the risk of the business being turned into a ponzi scheme rises every day and someone will have to eventually pay the price.

Fortunately, the authorities have recognized the heightened risks in the industry. The Shanghai office of the People's Bank of China, the country's central bank, recently warned against the risks of the hot sneaker trading business and called on institutions to pay special attention to risks and adopt effective measures to avoid them.

Indeed, we can never pin hope on the self-discipline of institutions. Hence, it is essential that the authorities impose strict regulations to prevent the sneaker trading business from going astray and causing a financial earthquake. To this end, the authorities need to introduce more detailed and targeted supervision-so as to ensure the healthy development of the business.

After all, even after nearly 300 years, the lessons from the Dutch tulip mania still ring true, not least because human nature hasn't changed much. And lest we forget, greed could be the death of humans.

The author is a writer with China Daily.

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