A PALACE OF GOLD IS SOLD OFF FOR ITS MELT VALUE, BUT NOT THE THRONE
Jonathan Cheng

A1
July 7, 2008

HONG KONG — At $800 an ounce, the golden bathroom sink had to go. At
$1,000, say goodbye to the golden horse-drawn chariot. But don’t even
think about touching the golden toilet.

Global economic uncertainty over the past few years has pushed gold
prices into the stratosphere, and few people have felt that rise as
much as Hong Kong entrepreneur Lam Sai-wing has. He has spent the past
decade constructing a palace of gold, decked out in six tons of the
precious metal. In recent years, the palace has become an attraction
mainland Chinese tour groups couldn’t miss, and a boon for Mr. Lam’s
retail jewelry business, Hong Kong-listed Hang Fung Gold Technology.

Since gold prices hit four-digit territory earlier this year, Mr. Lam
has been taking apart his hall of gold as quickly as he once raced
to construct it. He is melting down golden chandeliers, armchairs
and armored knights and selling gold by the ton to fuel growth plans
that include hundreds of new retail outlets in mainland China. But
even with the selloff, one thing is certain: The toilet stays.

"I don’t care if gold hits $10,000 an ounce," Mr. Lam says. "I’m not
melting it down."

As far as Mr. Lam is concerned, the golden toilet is more than a
Guinness World Record-certified, 24-karat, fully functional flushable
throne.

Mr. Lam, a former goldsmith, came up with the toilet gimmick in 2001
as he was pushing his jewelry-manufacturing business into a fierce
retail market. The come-on worked so well that he quickly added ton
after ton to his glittering hall. At its peak, Mr. Lam’s collection
included a golden king-size bed, a 5-foot-8-inch-tall traditional
Chinese statue of the "Guan Yin" goddess of compassion, and the 12
animals of the Chinese zodiac. He named his 7,000-square-foot display
the Swisshorn Gold Palace.

Obsessed With Gold

As a boy growing up in Cultural Revolution-era China, Mr. Lam,
now 53 years old, was obsessed with gold. He says he found himself
transfixed with one sentence in Vladimir Lenin’s writing: "When we
are victorious on a world scale, I think we shall use gold for the
purpose of building public lavatories in the streets of some of the
largest cities of the world."

Lenin’s words alluded to a socialist utopia with no need for money, but
Mr. Lam read them as an indictment of the poverty-stricken existence
he found himself in. He rarely had meat to eat, and after he turned
7, Mr. Lam struggled to help his single mother and six siblings sell
bananas and peanuts.

"Life, it was tough," Mr. Lam said in a recent interview in his
gold-bedecked office, decorated with golden pillars and statuary.

At age 22, Mr. Lam escaped from his impoverished hometown of Chaozhou,
fleeing by foot for nearly a month before swimming across a river
to Hong Kong, he recalls. When he arrived, Mr. Lam looked up some
relatives and got himself an apprenticeship as a goldsmith. He soon
set up a small wholesale jewelry business.

When China began opening its economy in 1979, as part of a sweeping
reform movement, Mr. Lam was among the first to open a factory there,
a jewelry manufacturer of about 100 workers in the southern city of
Dongguan. By 1998, Mr. Lam was readying his company to go public,
and to launch a new retail venture.

"Building a gold toilet, I realized, was the perfect way for me to
put into reality something that has been in my head since I was 16
years old," he said. Besides, he added, gold prices were so low they
could only go up; buying gold at $200 an ounce would hedge against
inflation. "It would be like an investment, plus we could let people
see it for an admission fee, and we could use it to launch our brand,"
he says.

Smash Hit

Not everyone was on board with the plan. His board of directors balked
at the idea, and his friends called him crazy. But Mr. Lam had his way,
and construction — headed by Mr. Lam — began. The toilet became a
smash hit.

Mainland Chinese tours made it a highlight on their itinerary, and
before long, the hall was drawing as many as 100 tour groups every
day. The jewelry gift shop — the company’s first retail outlet —
reeled in about $100 million a year in sales for the company at its
peak, while sales of Hang Fung’s jewelry lines pushed company profit
to new highs by 2003. The attraction even drew Communist officials
from mainland China, fascinated that a capitalist haven like Hong
Kong could have realized Lenin’s dream without having first created
a socialist utopia.

"The first time I saw it, I thought, ‘How wonderful — how absolutely
wonderful,’" one recent visitor told a Taiwanese television crew as
he and others crowded around the toilet. "There’s just so much gold
everywhere. Never did I think I could see so much gold, not even in
my wildest dreams."

Competitors have set up gold showrooms of their own, but none as
flashy as Mr. Lam’s.

Tse Sui Luen, a high-end rival, has constructed its own showroom. The
place has a precision-timed tour modeled after a Disney World
attraction, introducing visitors to the company’s founder (a "sparkling
legend") before whisking them by a workshop of laborers fiddling with
custom jewelry under bright lights and into the gift shop. "You want to
keep it like a tourist attraction," says TSL’s chairman, Erwin Huang.

When gold hit $980 an ounce in March this year, Hang Fung unloaded a
ton of gold, and later slimmed down by two more tons, reaping about
$64 million in the process.

"This latest rise in prices has been incredible," Frank Wu, Mr. Lam’s
chief financial officer, said as workers hacked away at the furniture
downstairs. The price of gold came down from a March 18 peak of
$1,003.20 an ounce, to $848.90 on May 1. Since then, it has bounced
back yet again, to $925. This past week, it has been around $880.

If prices rebound, Mr. Wu says, the company will sell more. But not
the commode.

"The toilet and the Guan Yin statue are the most valuable
pieces," Mr. Lam says. "The Guan Yin is a goddess, and she is to be
worshipped. As for the toilet, that’s the cornerstone of our company,"
located though it is in the golden bathroom of the golden palace. "It’s
an icon. It will never be taken apart."