Every year when the Qingming Festival comes, the “unaffordable death”, “unaffordable burial”, “sky-high tomb”, etc., will once again become a sensitive topic for Chinese people, and this year is certainly no exception, but also, more This year is certainly no exception, but also, there is a “cemetery loan” news.
In mid-March, news spread online that a bank in Yunnan and a cemetery in Kunming would jointly launch a “cemetery mortgage loan” before the Qingming Festival this year. The loan has no maximum limit and requires collateral such as the buyer’s property, and the loan term is 10 years. When the news came out, it was ridiculed as “even the money of the dead are earning”, then the loan product was called off.
In fact, in the past few years, due to the intensified competition in the financial market, there are many innovative financial products. Why did the “cemetery loan” cause such a social backlash? The fundamental reason is because it touches the most helpless pain point of the Chinese people, from housing loans to cemetery loans, not only a lifetime of loan repayments, and a hundred years later, children and grandchildren to pay, this life, how helpless ……
Funeral costs as a percentage of annual income in mainland China ranks second in the world
So, how helpless are the Chinese people?
According to a global funeral cost survey report released by the British life insurance agency SunLife in 2020, the proportion of funeral costs to annual income in mainland China ranked second in the world, after Japan.
This report shows that the average funeral cost in Japan is about RMB 200,000, or about 68% of the average annual salary of Japanese people; while the funeral cost in mainland China is about RMB 37,000, or about 45.4% of the average annual salary.
And in the Chinese funeral costs, cemetery prices continue to rise, more profitable than real estate, many cemeteries are sold at shocking villa prices. Remember a decade ago, Ge You acted in the “Do Not Disturb”? There is a scene in the play is Ge You matchmaking, was sold to buy a royal feng shui cemetery, a piece of land 30,000 yuan, said a few years later will rise into 300,000. At that time, this bridge looks a little exaggerated and ridiculous, but more than a decade of light passed, but found to become a prophecy ahead of its time. It is no wonder that some friends lamented that it is now “raining at the Qingming Festival and the price of a grave is breaking the soul”.
Just before the Qingming Festival, the mainland media reported the situation of some cemeteries in various cities, for example, the salesperson of Shanghai Supreme Garden said that the price of graves, like the price of housing, has been rising. The lowest price quoted for the park’s cemetery is 110,000 yuan, while the rest of the cemetery’s prices are “uncapped”, ranging from more than 100,000, 200,000 to more than 2 million.
In the Tianshou Cemetery in Changping, Beijing, a set of double cemeteries with standing monuments starts at $429,800 (yuan). Cemetery cemetery sales staff said that in recent years, cemetery prices have continued to rise, with an average annual increase of more than 10%.
In the face of sky-high cemetery prices, many Beijing residents have no choice but to choose some relatively cheaper cemeteries in Hebei Province. After death, they have to leave their hometown and be buried in other cities, which makes many people feel uncomfortable.
Other residents are forced to buy a house in a neighboring city to store their ashes, and a property can be used to house several deceased people at the same time, and the term of use has been extended from 20 to 70 years.
The seemingly flexible strain behind the reveal is precisely “can not afford to die” the absurdity and bitterness.
Cemetery prices continue to rise investment “speculation tomb” can not be ignored
So, why do the prices of cemeteries in mainland China continue to rise? There are many reasons, such as increased land costs, rising labor costs, changes in consumer attitudes, etc., but there is also a factor that should not be ignored, is the prevalence of investment “tomb speculation”.
Or in the early 90s, when most people still do not understand the funeral industry, there are companies in Guangdong will be ashes tower “beautified” into a “small property” to sell, and made similar to the sales model of marketing.
At one time, the slogan “it’s better to speculate on properties than on cemeteries” began to spread among the public, and this trend of tomb speculation formed a trend in Guangdong Province, and then spread to other cities in China.
It was not until December 1997 that the Ministry of Civil Affairs issued a notice prohibiting the use of ashes storage facilities for improper marketing activities. Since then, the government has also introduced various measures to prohibit “speculation in the purchase and sale of graves or ashes”, but it has not been able to fundamentally stop the “tomb speculation”, and the main reason, of course, is the investment value of the cemetery.
There is an online article published two years ago, the title is “I was 14 years old, my parents bought me a good cemetery”, about a girl surnamed Li, around 2000 when she was in her second year of junior high school, was told by her father that she was also a person with a cemetery. At that time, their family had just finished taking care of their grandmother’s funeral. She later learned that the family’s grave was set, inside the same garden, at a price of less than 30,000 yuan per square meter.
In the blink of an eye more than a decade has passed, the same type of cemetery prices in the same cemetery has risen over 150,000 yuan per square meter, an increase of more than 300%, which makes Xiao Li very grateful to her parents, saving a large part of the money for the future.
Of course, there are many speculative tomb of the retail investors burned to the hand, fried themselves into the tomb owners, the situation is worse than the speculative coins, speculative shoes, speculative stocks. First of all, retail investors are not institutions, in the transaction itself is at a disadvantage. For example: retail investors want to change hands, you have to face a large number of first-hand new tomb competition in the cemetery, second-hand graves naturally have to be discounted; in addition, there are many money-making enterprises, after selling the cemetery simply do not do development and operation.
A Mr. Li in Shanxi encountered such a bad luck, he hoarded 48 graves at a single price of 9,600 yuan in 2004, but the cemetery was not delivered for more than a decade. So in 2017, he was forced to take the cemetery to court with a lawsuit, demanding a refund. But in the end, he was only awarded 2,000 yuan for each occupation fee, and had to accept installment payments.
In addition, tighter and tighter government controls have left many retail investors who speculate on graves trapped.
For example, since 2010, provinces and cities have strictly restricted the purchase of graves without death or cremation certificates, according to the regulations of the Communist Party State Council and the Ministry of Civil Affairs’ Measures for the Management of Cemeteries. Except for the last century, the purchase of a grave space in this century has only the right to lease use, not ownership, and transfer is illegal.
These regulations have curbed the wind of tomb speculation, and many retail investors no longer consider the issue of making money, but only seek to sell the tomb space as soon as possible to preserve the capital. But until now, there are still some mausoleum sales staff said that they can be transferred to others privately, continue to play the policy of “rubbish”.
However, compared to the profits obtained by the funeral enterprises, speculation on the tomb of the retail investors, no matter how much money they make, is a small witch. And statistics show that since 2003, the funeral industry has been on the list of “China’s top ten profitable industries” several times.
Some people say that the roadblock on the road to the Yellow Springs. So, is there really profiteering in China’s funeral industry? Let’s take a look at the operation of some of the largest funeral enterprises in mainland China.
Cemetery development is more profitable than real estate?
Founded in 1994, Fushouyuan is the largest provider of funeral services in mainland China. When it landed on the Hong Kong Stock Exchange in December 2013, the company’s net profit was already over $100 million, with a gross profit margin of more than 80%. By 2020, Fushouyuan achieved revenue of 1.893 billion yuan, an increase of about 2.3% year-on-year, and net profit of 620 million yuan, an increase of about 7.2% year-on-year.
Among them, the sale of graves is the largest source of revenue for Fuso Park, accounting for 74.38% of the total revenue in 2020; the average unit sales price per grave is 107,700 yuan, an increase of about 5% year-on-year.
And according to data released by the National Bureau of Statistics of the Communist Party of China, less than 30% of the 70 large and medium-sized cities will see their new home prices rise by more than 5% in 2020. In other words, the rate of increase of Fushenguan cemetery exceeds the rate of increase of house prices in most large and medium-sized cities in China.
The A-share market’s “funeral first stock” Fucheng’s financial report also shows that from 2016 to 2019, Fucheng’s funeral industry gross margin gradually increased from 84% to 87%. Although the business’s gross profit margin in 2020 decreased by 6.13 percentage points year-on-year, it still remained at 81.01%, the highest among all businesses. In contrast, the gross margin of the company’s live cattle, beef, lamb and probiotic powder operations was only around 20% during the same period.
So, what does an 80% gross margin mean? According to the information, in 2019, among more than 4,000 companies in the A-share market, only 96 companies have gross profit margins of more than 80%. And the average gross profit rate of the real estate industry is only 35.27%, and only one real estate company has a gross profit rate of more than 80%.
So, where does such a high gross profit rate in the funeral industry come from? One important reason is the cheap cost of land. For example, most of the land in Fuzhou Garden was acquired more than a decade ago, the price is very low. For example, Henan Fuzhou Garden, covering an area of 300,000 square meters, the nature of the land for wholesale land, the original land acquisition cost only 44 yuan per square meter. Then look at Shanghai Fuzhou Park, covering an area of 400,000 square meters, the nature of the land is allocated land, the original land acquisition cost is only 190 yuan per square meter, however, in contrast, the most affordable flower bed burial price in Shanghai Fuzhou Park 2019 is 8,000 yuan per square meter, and some indoor burials are even as high as 36,800 yuan per square meter.
The root cause of funeral industry profiteering: the combination of government and business monopolize resources
In addition to cheap land, there is another important reason for the huge profits made by Fusheng Yuan, which is monopoly.
The funeral industry in mainland China is still in a semi-monopoly stage. In particular, the funeral industry, such as funeral, cremation, etc. are operated by the civil affairs department; burial industry is also in a semi-administrative. At this stage, it is not easy for private capital to enter this industry, and a market lacking competition is bound to be a profitable market.
Of course, companies that can enter this industry have either explicit or implicit political and business ties behind them, and all have government agencies behind them.
According to mainland media reports in 2015, the Shanghai Municipal Civil Affairs Bureau is the second largest shareholder of the company, holding 23.28% of the shares, which is not far from the 25.30% shareholding of the first largest shareholder.
Moreover, the relationship between Fuzhou Garden and the Civil Affairs Bureau is much more than that. Shanghai Fushouyuan was wholly owned by Shanghai Zhongfu Industry in 1994, which was formerly known as the Shanghai branch of Kanghua Industry Co., a collective enterprise established in 1985. This company was merged into the China Welfare Enterprise Corporation in 1990 and became a national ownership enterprise, later renamed as Zhongfu Industry, a wholly owned enterprise of the Ministry of Civil Affairs’ Institutional Service Center.
Some analysts believe that it is the close relationship between Fushouyuan and state-owned assets and the civil affairs department that allows it to receive “unstinting” support from government departments, such as land allocation and threshold access, which gives Fushouyuan a natural advantage.
This is not only the case for Fuzhou Park, but also for other funeral operators, who have the shadow of the Ministry of Civil Affairs and other Chinese government agencies as stakeholders. It is with the help of these institutions that these funeral enterprises are able to monopolize cemetery resources and thus make high profits. Under such circumstances, how can the CCP government really eliminate such industry profiteering? The number of deaths in China is over 9 million every year, and the amount of money made by the Chinese Communist government at all levels is believed to be an astronomical figure.
The Chinese people say that the dead should be buried and buried in peace, but after a lifetime of running around, they still have to worry about where to find a place to rest in when they are old.
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