Smoking out a bargain at 100 x price of gold

The heady, sweet smell of incense filled the small teahouse, where Mike Li and his friends converged to pass a small piece of timber around. They lit it, sniffed it and tried to savor the subtle aroma.

Looking like any other piece of dead wood, this particular one cost more than 100 times the price of gold. As an ancient Oriental fragrance for religious rituals and herbal remedy, agarwood, or chenxiang, is today being appreciated by wealthy Chinese people, especially the tuhao — the nouveau riche.

Li, 42, a successful businessman dealing in cars, leaned very close to the wood and frowned slightly into the smoke, his face puzzled.

"The fragrance is surely pleasing. But in terms of the complex layered smell they (veteran collectors of agarwood) told me about, it is impossible to tell," Li tells Shanghai Daily.

Li started collecting agarwood very recently and has spent millions of yuan just for the pleasingly scented wood. Wearing a Patek Philippe watch and a bracelet of agarwood with ivory beads bundled around it, Li speaks for the new fashion of most tuhao.

They are getting tired of buying LV or Hermes, gold and jewelry and look instead for something rare and with investment value.

Then what could be more luxurious than simply burning a piece of wood that costs 50,000 yuan (US$8100) per gram, for a moment of joy, and then it's gone, up in smoke?

On Monday an auction at Four Seasons Hotel Shanghai raised more than 60 million yuan (US$9.73 million) from the sale of 12 pieces of agarwood from Hainan Province. Some went for 60 percent higher than their floor price.

International auction houses Sotheby's and Christie's fetch more than US$10,000 a gram for this so-called "diamond of wood," more than 100 times the price of gold.

And the price keeps soaring.

Agarwood was originally from Indonesia which still produces the only wood that leaves a fine fragrance without burning, with the exception of a few top-quality pieces coming from recognized production areas of China and Vietnam.

Henry Zheng has been collecting agarwood for 15 years, following his father's footsteps. Last year, Zheng bought a piece of chenxiang — a curved decorative object in Chinese Buddhism or talisman made in the Qing Dynasty (1644-1911) — in Japan for 1 million yuan. This year, he sold it for twice that price to another collector.

The object is 60 centimeters long but not made in one single piece of agarwood. It is delicately carved with a combination of several pieces of agarwood timbers. Generally, the bigger the material, the higher the price.

Because it is rare and extremely valuable, some traders try to sell fake agarwood. Massive pieces of agarwood artworks, bracelets or natural wood in the market are vastly overpriced.

Putting the chenxiang into water to make sure they sink is one way to judge the quality for many beginners who lack experience in analyzing the smell and color. If it sinks, that guarantees high density of the wood.

Li, as a "virgin" of collecting agarwood, was conned by a businessman out of 300,000 yuan by purchasing 18 chenxiang beads, each 1.6 centimeters in diameter.

When Li showed the beads to experienced collectors, he was told he "spent tuition fees" in collecting chenxiang. They chopped the beads in half and found lead inside, a common trick to make agarwood sink. Though the cover was real, these beads were worth merely 3,000 yuan at most.

Eric Sun, a Beijing businessman, bought three natural agarwood pieces, each the size of a baby's fist, in Taiwan during a business trip. He spent 860,000 yuan. They were fake scented wood that looks like agarwood.

"My friend (a veteran collector) told me the oil thread on the wood seemed weird and the smell was too rich to be true. Now they are just three pieces of garbage," Sun says.

"The agarwood market has improved in recent years," says Wu Qing, a professor of archeology postgraduate school at the Chinese Academy of Social Science (Shanghai campus) and a scholar in traditional incense culture. "If customers buy chenxiang at large, licensed shops, there is only a 10-percent chance of getting fake ones."

Nonetheless, the quality of chenxiang varies and carries huge price differences — from 15 yuan to over 50,000 yuan per gram. Unless they really know what they want, customers are very likely to spend a great deal of money for defective pieces.

For collectors, no machine or institution can distinguish the quality of chenxiang. It's all about experience and feeling. Sometimes, even the traders are conned by the suppliers.

Wu says to distinguish good agarwood from low one, producing area is very important.

"Not just a general area, but the specific location of the forest (where it comes)," he adds. "Also, street vendors have very low credibility."

Appreciating chenxiang takes a long time to cultivate, Wu says. "It involves massive reading on history, your cultural background, long-term training on authentication. And how people react and imagine with the smell also matters," says Wu.

Henry Zheng, another collector, observes that most wealthy collectors don't know how to appreciate chenxiang, over-emphasizing the size and fragrance of timber.

"It's like appreciating a beauty," Zheng says. "People usually like a woman who dazzles at first sight. But they could most likely miss out on those quietly elegant ones."