China, the sex trade and quality assurance: some observations

Intriguing article from China Daily (via China Law Blog) that examines recent Chinese legislation covering bath houses and massage parlors.

We at "China Economics Blog" are of course more interested in the economics of this article rather than the legal angle.

One of the sure fire winners from the new legislation is condom vending machine owners who I expect will see a run on stock as bars and hotels clamber to stock up on the large number of varieties available.

It will be interesting to see whether Chinese machines begin with a simple vanilla offering (metaphorically I might add). Then, as China develops, the theory suggests that they will Chinese develop a wider taste is condoms whether we will see the same move into colours, flavours and textures. Of course luxury brands will demand a premium price. This is one area where you would hope the quality would hold up (given the expensive consequences).

Perhaps more importantly the Chinese "crack down" may have its origins in the recent "quality" issues that have plagued Chinese exporters and the backlash at home from consumers who want a quality product (aside from condoms).

The prostitute market has an element of asymmetric information (market for lemons) as the consumer may be unaware of any diseases that may be present. What is needed therefore is regulation. As always in economics we assume that the higher the price, the higher the quality. Certification may help individual sex workers prove to consumers that their product is of high quality.

The fact that demand for sex trade is growing so rapidly is also a reflection of rising incomes. As people become richer they demand luxury goods. Whereas one may previously have forgone purchased sex in favour of a cheaper (free) alternative, increased levels of disposable income have led to a rise in demand.

An international PPP comparison of prices would make interesting reading, a little like the "big Mac" index that the Economist publishes. I am sure you can fill in your own punchline as to what the new index could be called.

The problem with this index is that one cannot account for regulations/laws and of course, as in the case of the "big Mac", productivity differences.

Tighter rules on bath houses, massage parlors

The Ministry of Commerce has ordered all public bath houses to make their premises more accessible to public inspections in a bid to fight the growing sex trade.

The ministry released draft rules on Thursday that require bath houses with massage rooms to be viewed openly from the outside.

Foot-massage parlors must have their cubicle doors unlocked when attending clients.

The draft rules have been posted on the ministry's website to solicit public opinion before September 10.

Commerce and health authorities are determined to combat the spread of sexually transmitted diseases in public places.

Earlier last month, the commerce and health authorities ordered all hotels, resorts and public bath houses in the country to provide condom-dispensing machines.

Some cities have already taken the lead in cracking down on the sex trade.

Shanghai introduced regulations last year requiring all bath houses and hair dressing saloons to have clear glass windows.

The eastern province of Zhejiang passed a regulation in March requiring all hotels and bars to install condom-dispensing machines.

The new draft rules also stipulate that towels, slippers and teacups, should be sanitized after use.

Water in bathing pools should also be refreshed at least twice a day.

These new rules tighten existing ones, which are now outdated, the ministry of commerce said.

Bath houses and massage parlors will be ranked every two years on their standards, those failing will be ordered to shut down.

One of the comments on China Law blog provides some sobering statistics:

That said, these new rules are hopefully a genuine "part of China's overall safety efforts." From 1990 to 1998, syphilis rates increased 20 times, gonorrhea rates tripled, and genital warts rates quadrupled. Estimates of HIV/AIDS ases in China range from Beijing's sanctioned 640,000 to 1.5 million and above. China's Ministry of Health claims that 43.6% of new HIV cases in 2005 result from sexual transmission, and that 19.6% of the total cases are the result of commercial sex workers and their clients. The bureaucrats in Beijing surely realize the huge detrimental effect that widespread HIV/AIDS can have on a nation's growth, as witnessed in West Africa. Beijing has already taken many steps to reduce HIV/AIDS, and this is probably one of them.