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CHINA

Authored by: Richard Lehmann

The economy of China has had explosive growth the last 10 years and its stamp prices have reflected this to an astounding degree. My universe of investment rated stamps is slightly more than 1000 stamps and includes only stamps issued to 1950 and cataloging at least $25 today. This excludes almost all issues of the Peoples Republic of China which was only founded in 1949. This leaves only about 3000 Scott catalogued varieties of stamps. In short, almost one third of all the stamps issued in this time period have risen to above $25 which I doubt any other nation, with the possible exception of the USA, have achieved.

In terms of price appreciation, the numbers are even more impressive. The five year appreciation has averaged 164% and for ten years, 719%. These are astounding numbers and deserve a more detailed look since the aggregate value of these stamps is some $3.8 million. When one looks at stamps below $1000 the picture is quite a bit different. Mint stamps have a five year appreciation average of 45.1% and used, 27.8%. These are more reasonable numbers, but they leave open an obvious question, namely, what accounts for the 175% five year and 719% ten year appreciation by the 250 stamps cataloging over $1000? The answer may lie in what is going on in China today.

We see that the Chinese government is making a major effort to crack down on corruption by government officials. Several thousand have been caught up in an anti-corruption campaign and it may continue on for some time. What makes this campaign so successful there is that the banking system is wholly transparent to the government so it is easy to see who is on the take. Enter postage stamps, which is a way to bribe a government official without leaving a money trail. In fact, given their price appreciation and low visibility, they may well become the preferred method of bribery.

Given the crack down on monetary bribes it stands to reason that stamps will become an even more popular method of hidden payment and wealth transport. Hence, I would expect that the appreciation of the priciest stamps will continue to outperform the market as a whole. I would also expect that many of these will turn up in auctions since we are seeing massive wealth outflows from China as their economy cools and the corrupt choose to travel abroad. But individuals in China are limited to $50,000 a year in foreign bank transfers, thus creating a great need for an alternative to cash. I would also speculate that in the future, even stamps below $1000 will benefit, since lower echelon bureaucrats must also be accommodated and are equally vulnerable.

The rational and economics of stamp investing can offer opportunities similar to what we experience in the stock market. And sometimes, those opportunities arise from similar devious roots. Who knew stamp investing could be so interesting!

Here are some candidates as investment buys. As a word of caution, many of the high priced stamps are overprinted. Since they are easily forged, they should only be bought with a certificate.


  5 YEAR APPREC.%   10 YEAR APPREC.%
Scott   Mint   used   Mint   used
274a  900.0  1275.0  1233.3  2650.0
81  900.0  900.0  1042.9  1263.6
12a  314.3  385.7  417.9  608.3
3LQ27  300.0  130.8  300.0  130.8
3LQ28  300.0  92.0  300.0  92.0
3LQ26  271.4  92.3  271.4  100.0
34b  257.1  19.0  257.1  19.0
11  233.3  460.0  400.0  775.0
E10  233.3  1566.7  233.3  1566.7
C2  208.8  218.2  90.9  101.9
J16  207.7  150.0  207.7  150.0
12  200.0  366.7  350.0  677.8
67a  191.4  0.0  191.4  0.0
170a  185.7  395.2  185.7  395.2
102b  181.8  81.8  181.8  81.8
15  181.3  273.3  350.0  460.0
29a  177.8  50.0  177.8  50.0
100a  166.7  33.3  166.7  33.3
10  164.7  455.6  260.0  769.6
8  157.1  100.0  285.7  542.9
14  150.0  350.0  270.4  1141.4
9a  150.0  216.7  244.8  850.0
M10  150.0  87.5  166.7  100.0
J33  150.0  114.3  204.3  200.0
85a  144.4  104.5  633.3  260.0
9  144.4  163.6  266.7  806.3
84  140.0  1958.8  620.0  4566.7
E9  140.0  244.8  157.1  316.7
20  136.8  150.0  414.3  525.0
22  132.1  54.8  441.7  650.0
23  125.0  84.2  350.0  400.0
8L16  124.0  65.2  133.3 65.2
189  120.0  18.4  223.5  125.0
102c  118.2  81.8  118.2  81.8
19  118.2  100.0  357.1  426.3
16  116.7  72.7  622.2  331.8
269  116.7  40.0  173.7  75.0
J41  116.7  185.7  136.4  233.3
17  115.4  80.0  366.7  500.0
J14  115.4  45.5  154.5  100.0
31a  114.3  42.9  114.3  42.9v
24  111.8  56.3  350.0  316.7
33b  110.0  5.0  110.0  5.0
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