ARTICALE

GONG VILLAGE, China -- Day after day, men try to wheedle their way into the home of Fan Pingping, a 78-year-old widow who lives in this small village in China's Shanxi province.

Feigning interest in her Qing dynasty courtyard home, the visitors go inside in search of what they are really after. Tables, benches, window frames, even her simple rice-basket -- they want to buy it all. "I don't want to sell it," she says. "I want to keep it for my son."

Ms. Fan's suitors are after the last of the good Chinese antiques. China's cultural cachet is expanding fast across the globe. At Sotheby's and Christie's, Chinese artwork fetches record prices at auction. Chinese movies like "Kung Fu Hustle" and "House of Flying Daggers" do well at American box offices. And in the world of home decor, China has become hotter than ever.

Chinese furniture "has proliferated everywhere," says Marcus Flacks, owner of MD Flacks Ltd., a store in New York specializing in high-end furniture from China. "Every general furniture store has it."

But with supply limited, the best pieces command exorbitant prices. A 200-year-old walnut table that can be purchased for as little as $200 in Ms. Fan's village can turn up in New York priced at more than $4,000. At auction, a pair of chairs made from huanghuali, a type of rosewood, has sold for $134,000.

That demand has given rise to a cottage industry in Chinese furniture runners -- people who travel from village to village knocking on doors to buy artifacts. One of the profession's pioneers was Fan Kong, who started in the business 17 years ago when a nearby dealer asked him to find some local hardwood furniture. He bicycled to a village a few miles away from his hometown of Xinjiang, bought a table for $92 and sold it for more than twice that.

Dealers, often several layers of them, add their own huge markups, inflating the prices these pieces ultimately fetch. Antiques arbitrage earned good money for Mr. Fan, and also for a network of runners he helped recruit from the village of Dong Niu in southern Shanxi to help navigate unpaved roads in pursuit of furniture in distant villages. Eventually, his colleagues built their own businesses. About a hundred men, nearly a quarter of the entire village, now buy and sell furniture. The richest have built fortress-like homes and helped pave the road to their village.

Over the years, Mr. Fan has learned the fine art of persuasion to pry away family heirlooms. "It's a battle of wits with the seller," he says.

He learned to employ other skills, too. Once, Mr. Fan says he tiptoed shoeless into the home of a blind woman to evaluate a table she didn't want to sell. When he realized its worth, he helped her eager son to carry it away in the night while his mother was asleep.

A colleague had to find a way to make two feuding brothers part with a pair of food baskets they had inherited. Each brother held onto a basket, refusing to part with it if the other sold his. The buyer managed to get both baskets by telling each brother the other wouldn't sell.

Now, however, the competition that Mr. Fan helped foster is eating into his profits. On a recent trip to Gong village, he visited the family of Zhao Hailin, owner of a pair of old tables he had been coveting for years. Ms. Zhao, an old client, refused to sell, explaining that the tables once belonged to her ancestors and selling them would bring bad luck to her family.

This time, Mr. Fan noticed that the tables were gone. A rival buyer, it turns out, helped Ms. Zhao overcome her reservations. "I sold it to them because I have two daughters," explains Ms. Zhao, "and they needed to go to university, and I needed the 3,000 yuan," or about $360. While Ms. Zhao expresses pangs of regret, she is also grateful that these heirlooms have helped pull her family out of poverty.

For Mr. Fan, however, it's just another sign of the shrinking market. "Now there are more wolves than there is meat," he says.

Owners are also catching on to the game, and demanding better money. "For years, we tried to keep the prices secret," says Mr. Fan. Lan Xiuyan, 51, sold her grandparents' collection of old furniture and ceramics for about 40 to 50 yuan apiece, or about $5 to $8. She even sold the old timber beams of her ancestral Ming dynasty home for $12. "At first, I wasn't aware of their value," she says, blanching at the memory. "I thought they were junk."

Now, Ms. Lan is determined to get the most for her remaining collection: a Ming dynasty black lacquered table and a pair of walnut horseshoe chairs. She says she wants more than $20,000 for the lot. At that price, Mr. Fan says he can't earn a real profit, just a modest commission for selling them on her behalf.

The competition now can get cutthroat. Occasionally, when negotiations reach a sticking point, "the buyers get angry and so sometimes send thieves to get the furniture," says Mr. Fan.

That has prompted some owners to beef up home security. Wu Qunliang, a dealer in Dong Niu, pulls up a pant leg to flash scars from dog bites he says he has suffered in the line of work. But he frets less about dogs than about the scarcity of high-quality merchandise. "Things we wouldn't buy last year, we're now accepting," says Mr. Wu, a 15-year veteran of the business. Good pieces require persistence. Mr. Wu says it took him five years to finally secure a set of cabinets and bookshelves from an elderly woman who was reluctant to sell.

With villages around his home town increasingly barren, Mr. Wu has started scouring neighboring provinces for new supply. But now he's looking to boost his profit margin by getting closer to customers -- including foreign buyers -- and cutting out middlemen. Next year, following the lead established by other dealers from his village, Mr. Wu plans to open a shop in Beijing.

Runners such as Mr. Fan persist in knocking on Shanxi village doors in a quest to root out the last gems. "There is still some good furniture with the old people who don't want to sell," he says. They don't but their children often do.

During a recent visit to Fan Pingping's home, Mr. Fan (no relation) discovered a beautiful antique altar table in her back room after ignoring her protests and pushing open a door.

"There is nothing in there," said Ms. Fan, who once watched helplessly as one unscrupulous runner pulled out a knife to pry open her cupboards. But it was too late: Mr. Fan had already spied his prize. He offered $110 to see whether she would bite. At first, Ms. Fan protested that she was too old to have to buy new furniture, but after some prodding, she agreed to ask her son.

"Eventually," said the furniture runner, "if you push hard enough, and they are in a good mood, they will sell."

Word count: 1210

Copyright (c) 2005, Dow Jones & Company Inc. Reproduced with permission of copyright owner. Further reproduction or distribution is prohibited without permission.

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QUESTIONS

Based on the article Chinese Furniture Is In Such Demand, No Widow Is Safe from the June 20, 2005 issue of the Wall Street Journal, please respond to the following questions:

(a) Discuss whether you think the Chinese furniture runner industry reflects a purely competitive market.

(b) Assuming a purely competitive market, illustrate graphically a long run equilibrium for the market as a whole and also for a single representative firm in this industry.

(c) What had been happening to the demand for Chinese antique furniture when the article was written?

(d) Illustrate graphically on your diagrams in (b) what effect, in the short run, the change in Chinese antique furniture demand will have on the market price and the individual producer.

(e) What will happen in the long run, given your answers to part (d)? Explain.

(f) What do you think the long-run supply curve looks like for the Chinese furniture runner industry? Why? What impact would an increase in demand for Chinese antique furniture have on the long-run equilibrium price and industry output? Illustrate your answer graphically.

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