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The rise of China's super-rich

2014-02-04 03:47:05

By Bryan Borzykowski

China s economic growth may be starting to slow, but that s not stopping its

wealthiest citizens from cashing-in and spending their hard-earned salaries.

Many Chinese are getting richer and their free-flowing funds are being spent

around the world, according to several recent research reports.

From Vancouver to New York, London, Paris and Hong Kong, shopping mall sales

assistants are seeing more Chinese shoppers scoop up designer handbags than

ever before, while real-estate agents are fielding calls from tycoons looking

for living spaces with good feng shui.

Many of the newly prosperous are using the weeklong national holiday for Lunar

New Year this month to fly overseas. China National Tourism Administration,

estimates the number of Chinese outbound tourists will reach 8.5 million for

this year's holiday, up 13% from the 7.5 million travellers the previous year.

An increasing number are joining the ranks of the super rich. The number of

Chinese with more than 3.03bn Chinese yuan ($500m) in assets will grow by 6%

this year to 535 people, according to a recent report by Wealth-X, a

Singapore-based company that collects data on ultra high net-worth individuals.

Other studies have shown that the country s high net worth population people

with more than 10m Chinese yuan ($1.6m) is also climbing. Between now and

2015, the country s high net-worth group will swell from 800,000 people to

about 1 million, estimates US-based global management consulting firm Bain &

Company.

Where s all this money coming from? Massive economic growth, said Mykolas

Rambus, Wealth-X s CEO. For most of the last decade, the country s gross

domestic product has grown by about 10%a year by comparison, US GDP growth

has only exceeded 3% twice since 2003 and it s been business owners who ve

been able to take the most advantage of that rapid expansion.

China has been the workshop of the world and the individuals who capitalised

on that trend have done very well, Rambus said.

Young and affluent

Due to its rapid economic gains, China s wealth boom has occurred over the last

decade. As a result, most of the country s richest citizens are young and

experiencing wealth for the first time. This is in direct contrast to countries

such as the UK and US, where more money has accumulated by being passed down

from generation to generation.

This new Chinese elite are also younger than their counterparts in Europe and

North America. The average age of the high net-worth group is between

40-years-old and 50-years-old, compared with 50-years-old and 60-years-old in

other countries, said Jennifer Zeng, a Beijing-based partner at Bain & Co.

As fast as China is expanding, it will still be a while before its high

net-worth population overtakes America s, which, according to Wealth-X, remains

home to the highest number of rich people in the world.

Currently, there are about 65,500 American ultra high net-worth individuals

people with more than $30 million in assets compared to China s 10,675.

The US is still quite far ahead, but that s because the US economy is more

developed, said Tjun Tang, a Hong Kong-based partner and managing director

with the Boston Consulting Group. It may or may not happen, but we will

continue to see increasing numbers of high net-worth individuals and a

broadening of that wealth in China.

Ripple effect

All this newfound money is having a ripple effect around the world.

For starters, home prices in hot urban areas, such as Vancouver, London and New

York are soaring as Chinese buyers swoop in, said Zeng. In a recent survey she

conducted with 3,000 high net-worth Chinese, 30% mentioned real estate as one

of the top three investments they ll make overseas.

One reason many wealthy Chinese are scooping up homes outside of China is asset

diversification. It is also a way to get their money out of the country, said

Rambus.

Many of the well-to-do are worried the government will, at some point, come

after their riches. There s always a concern around what having extreme wealth

in China means as it becomes more visible, he said. Are you at risk of

running afoul of party guidelines?

Foreign businesses are also in demand, said Tang. In Europe, high net-worth

Chinese are seeking vineyards and chateaux.

It started out in real estate and it s spread to businesses, he said.

More wealth has also been a boon for companies that sell luxury items, whether

it s big name brands such as Gucci, Burberry and Louis Vuitton or smaller

operations such as Coach.

China has become an extremely important market for luxury goods companies,

said Tang. It s absolutely critical for some of these top end brands to be

there.

What exactly this Chinese high net-worth growth story means for the world

long-term isn t clear, but there are two things for certain, said Rambus

people are getting richer and they re spreading that money globally.

More (wealthy) Chinese are coming somewhere near you, he said. Whether that

s in leisure or in business, we ll see an increased number of Chinese growing

businesses, experiencing new places and putting down roots.