Facts and Details

RICH IN CHINA

rich Chinese wedding According to Hurun Report, and in Chinese yuan terms, the country had 875,000 multimillionaires and 55,000 billionaires in 2011 – 6.1 per cent more millionaires and 7.8 per cent more billionaires than in 2009. The tycoons are young, too. The average age of the respondents with at least 100 million yuan was 39; that of those with at least one billion yuan was 43. Both averages were a year younger than the previous year. [Source: Clifford Coonan Irish Times, January 22, 2011]

According to Forbes the number of dollar billionaires in China rose form 15 in 2006 to 40 in 2007. Shenzhen has the highest number of Chinese dollar millionaires per capita. According to the Boston Consulting Group there were around 391,000 millionaire households in China in 2008, up from 310,000 in 2007. India and China have the world’s fastest-growing populations of millionaires. According to Merrill Lynch, the number of millionaires in China increased 20.3 percent to 415,000 in 2007. A survey in 2009 counted 825,000 dollar millionaires with 116,000 of them in Shanghai

In 2006, there were 236,000 dollar millionaires, known as dakuan, in China, in 2005 and more than 250,000 in 2006, compared with 2.7 million in the United States. China now has the sixth largest population of millionaires in the world, far more than in India and Russia combined, and the number is growing at a rate of 15 percent a year.

By one estimate around six or seven million Chinese, about 5 percent of the population, have assets of $100,000. This is considered rich by Chinese standards. As of 2004, there were an estimated 10,000 Chinese with assets over $10 million. As of 2007, the richest 800 people in China had an average net worth of $562 million.

In Deng era someone who rose from humble origins to a position of great success was called "a golden phoenix flying from a pigeon's nest” and nouveau riche were called "red eyes." Today, rich Shanghaiese are sometimes referred to as “old carats.” The rich wives club is a reference to groups of women that come to Shanghai to shop from Nanjing, Wenzhou, and other entrepreneurial centers in Zhejiang.

In July 2008, Chinese investment fund manager Zhao Danyang of the Hong Kong-based Pureheart China Growth Investment Fund paid $2.1 million dollars in an EBay charity auction to have lunch with American billionaire Warren Buffet. It was the most expensive charity auction ever held on E-Bay. The money went to the Glide Foundation, which provides social services for the poor and homeless in San Francisco. Zhao and seven others had lunch with Buffet at Smith &Wollensky steakhouse in New York.

Good Websites and Sources: Hurun Report hurun.net ; Hurun Report Rich Listhurun.net/richlisten ; Forbes Rich Chinese List forbes.com ; Hong Kong and Taiwan Forbes Rich List forbes.com ; Expert: Huang Yasheng, who teaches at the Sloan School of Management at the Massachusetts Institute of Technology, is an expert on Chinese entrepreneurs.

See Chinese Billionaires, Separate Article

Communist Privileged Class

In the Mao era, the privileged Communist elite was made up of members of the Politburo, their staff, technocrats, bureaucrats, government engineers and lawyers. Many were Communist Party members. Some had peasant origins. Heros were Olympic athletes, and model miners and railway workers.

The Communist party elite enjoyed access to special restaurants, hospitals, vacation homes, and stores with a reasonable selection of consumer goods. Perks included the highest paying jobs, first dibs on desired goods, cars with drivers, money, travel privileges, fresh fruit and choice cuts of meat unavailable to ordinary people. Their children and grandchildren were ssometimes admitted to universities without having to take the difficult entrance exams.

The members of the professional class included writers, artists, senior professors, scientists and doctors. They had university or technical school degrees. Foreigners were a privileged class. They owned cars and apartments and enjoyed food and luxuries that no ordinary Chinese could afford.

Rich Families in China

According to recent reports by the People’s Daily and Nanfang Daily, 3,000 families nationwide control assets worth 1.70 trillion yuan ($248.9 billion), meaning that each of these nouveau riche clans is worth an average of 565 million yuan ($82.72 million). People’s Forum magazine conducted an opinion survey on the phenomenon of super-rich clans, finding that 91 percent of respondents indicated that the newly rich have benefited from networking with government officials and 69 percent said they had a bad impression of the well-heeled families. [Source: Russell Hsiao, China Brief, June 24, 2010]

There is well-documented evidence that the children of famous cadres, such as late patriarch Deng Xiaoping, ex-president Jiang Zemin, ex-premiers Li Peng and Zhu Rongji, President Hu and Premier Wen Jiabao, are successful entrepreneurs. According to liberal economist Luo Tianhao, a researcher at the Beijing-based Changjiang Business School, red families, meaning those of top cadres, figured prominently among the country’s affluent clans. These business clans boast deep political and economic capital, Luo said. He added that due to their political connections, these families do particularly well in trade, energy and infrastructure, which are sectors that are still wholly or partially controlled by the state. Take, for example, the Li Peng clan. Li’s wife and two children have been active in the energy sector since the 1990s. Son Li Xiaoping is the former chairman of China Huaneng, an energy conglomerate; and daughter Li Xiaolin is the CEO of mammoth China Power International Development. [Ibid]

See Princelings

Affluent Children of the Cultural Revolution

Jonathan Watts wrote in The Guardian: “The next day, Emily introduces me to Cindy Tai, the head of a marketing agency and former head of EMI Music in China, who helped organize the first Rolling Stones concert in Shanghai. As a child during the Cultural Revolution, Cindy and her academic parents were sent from Shanghai to a farm on the nearby island of Chongming. ‘We had enough to eat, but nothing to spare. We were very happy if we got a little meat on the table once a week. My parents suffered. I vowed that one day I would buy them whatever they wanted.’”[Source: Jonathan Watts, The Guardian, June 26, 2010, , edited from When A Billion Chinese Jump by Jonathan Watts Faber, 2010 ]

“She has achieved that ambition; now, her dream is ‘to create an organic farm. I'd like to grow fruit, vegetables and rice, raise pigs and chickens. And to have a helicopter, because the traffic is so bad.’ But like many affluent consumers around the world, Cindy's environmentalism seems selective. She has blueberries delivered from an organic farm, baguettes from a French bakery in Xintiandi and olive oil from Italy. She eats out at least once a day, and at one point she and her French husband had four cars: a BMW, an MG and two Mercs. Now they have two; a sign, she says, of their increasing concern for the planet. Later, however, she reveals that her interest has switched to yachts. One is moored near their second home in Cannes.” [Ibid]

“She may yet get another luxury car. Cindy is a member of the Shanghai Porsche club, mainly to keep up with her friends, and has been invited to an awards ceremony hosted by Jaguar. I shamelessly ask if I can come along. The venue for the Jaguar Gorgeous Award Party is a renovated mansion off Huaihai Road, a few minutes' walk from the Barbie store. In cocktail dresses and designer suits, guests sip wine in the courtyard, where they are treated to a sales pitch for the new 5-litre XKR: ‘It is a wow car!’ gushes a PR lady who introduces herself by her westernized name, Seraph. I am sceptical: ‘But you can barely move in Shanghai's traffic. Why would anyone want such a huge engine?’ ‘Rich people never take the subway,’ Seraph replies. ‘Even if the traffic is bad, they need a car. Jaguar is nothing but gorgeous and beautiful.’” [Ibid]

In the five years to 2009, sales of luxury cars in China rose five-fold, de luxe villas seven-fold and luxury goods tripled. This was just the start of a spending splurge: the number of wealthy households is forecast to double again by 2015.

Rising Number of Millionaires

In April 2011, China was on the verge of having 1 million millionaires. According to according to the Hurun Wealth Report the mainland has 960,000 millionaires with personal wealth of 10 million yuan ($1.5 million) or more. That is up 9.7 percent year-on-year, said the GroupM Knowledge -Hurun Wealth Report 2011. This is the third year of the report, written by publishing and events institute Hurun Report in cooperation with think tank GroupM Knowledge. In 2009 there were 825,000 such millionaires while last year the number had grown to 875,000. [Source: Qian Yanfeng, China Daily, April 13, 2011]

Rising property prices and a fast-growing GDP have been the key drivers for the rising number of Chinese millionaires, according to the report. It found that 55 percent of Chinese millionaires derived their wealth from private businesses, and 20 percent are property speculators who have ridden the fast hike in home prices. About 15 percent are stock gurus, while the remaining 10 percent are high-earning salaried executives.

Housing prices rose across the country by 13.7 percent in 2010 according to government statistics, with luxury property prices rising even faster. High-end property prices in China's leading financial metropolis Shanghai, for instance, grew 21 percent last year, according to figures from UK-based Knight Frank, one of the world's largest commercial and residential estate agents.

Despite the Chinese government's efforts to curb property speculation and control rampant housing prices, "the overall confidence of China's millionaires in the property sector and China's overall economy remains very high," said Rupert Hoogewerf, chairman and chief researcher of Hurun Report. "The impact (of the tightening measures) may be on excessive new wealth creation, but I don't think it is going to affect very much the (rich's) appetite for luxury products," said Hoogewerf, known in China by his Chinese name Hu Run. "For most luxury brands, the Chinese luxury consumers are now No 1: either representing the biggest market share or the fastest-growing," he added.

Of the 960,000 millionaires, 60,000 have been identified as China's super rich with 100 million yuan or more in wealth, up 9 percent year-on-year. Beijing led the way with 10,000 residents boasting 100 million yuan or more, followed by Guangdong province with 9,000 and Shanghai with 7,800. The three places also led in the number of millionaires with wealth of 10 million yuan or more.

According to the report, Chinese millionaires average 39 years old, a full 15 years younger than their Western counterparts. Thirty percent of the millionaires are female, the same as last year. The report also put the number of China's billionaires at 4,000, but only a third were on the Hurun China Rich List 2010. "(It suggests) there is still a great deal of hidden wealth in the Chinese economy," said Hoogewerf.

Getting Rich in China

Bugatti in China Early in the Deng era many tycoons in China made their money through real estate, Chinese medicines, investments and construction or took advantage of early privatization and restructuring programs launched in the late 1970s and early 1980s. Almost a prerequisite to getting rich was having some kind of connection with the Communist Party, possessing skills at navigating through bureaucracy and having a knack for forming friendships with key officials.

With so many fortunes made from government contracts and with funding from state-run institutions it has been said that getting rich in China is not a matter of know-how but of know-who. Often the secret is befriending the right officials and pushing the right buttons—whether they be perks, deals or outright bribes—to get their approval.

Many have got rich through less than legitimate means. According to an article in the China Business Times, early in the Deng era Beijing residents recognized several kinds of rich people. "red hats" government officials who took bribes; "yellow hats" pornographers; "blue hats" smugglers; and "white hat" drug dealers.

The accumulation of wealth is no easy task. There are lots bureaucratic obstacles and corrupt officials who want a cut and are willing to be spoilers if they don’t get it. Many millionaires rode high for a while and then found themselves in jail.

Much of wealth is held in assets that are difficult to transfer—yuan-denominated shares and government bonds—or cash or money in bank accounts that are often kept secret. Using methods developed by Hong Kong and by overseas Chinese, wealthy families set up a maze of public and private companies, including offshore entities. These companies exchange property, finances and shift profits around to avoid taxes. It is not uncommon for a company to have $280,000 in revenues and $16.3 million in profits one year and $134 million in revenues and $20 million in profits the next

The desire to get rich sometimes takes some extreme forms. In 2005, a 15-year-old girl kidnaped one of her relatives and demanded a $25,000 ransom. According to the Eastern Morning Post, “She sought to earn the most money on the shortest time.”

Pioneering Millionaires in China

beautiful Chinese woman Some pioneering businessmen were political prisoners or criminals in the 1970s and 1980s who were forced to go into business because they didn't belong to "work units" and were unable to get regular jobs.

Mou Qizhong, the owner of China's sixth largest private company in the mid 1990s, is a former glass factory worker who narrowly escaped a death sentence in the Cultural Revolution and was imprisoned in 1983 for profiteering. After he was released he made a small fortune from selling clocks. In 1992 he arranging a barter deal in which 500 railroad cars filled with Chinese-made consumer goods were traded for four Tu-154 airplanes and then used the planes to found Sichuan Airlines. His company had $1.1 billion in assets in 1995. At that time he began work at 5:00am and worked seven days a week.

Millionaire Yang, made his first fortune by encouraging customers in southern China to replace their boring white mosquito nets with brightly colored and patterned ones. Three years after hatching this idea he was a rich man. The Mongolian Niu Gengheng turned his passion for cows into the largest dairy products company in China.

Zeng Weili, an entrepreneur who rode around southern China on a bicycle in the mid 1980s selling shares for his company, created the Baoan Group, a conglomerate that controlled $675 million in assets in 1995. At that time the Baoan Group had stakes in 67 business and 37 joint ventures, including partnerships in chain of Peking duck restaurants, a pharmaceutical firm and a large Beijing department store. The company had offices in Hong Kong and Los Angeles and was beginning to venture into the movie business but was also trying to raise $60 million in cash to pay off angry bondholders whose bonds had come due, and prop up huge real estate projects that were in trouble.

China’s First Business License

In 1979, the first business license in China was given to Zhang Huamei a 19-year-old daughter of workers in a state umbrella factory who illegally sold trinkets from a table, who wanted to conduct her business legally. A few years earlier just seeking such a license would have earned her the label of “capitalist roader,” possibly making her a target of Red Guards attacks. Unable to obtain such a license in her home town she traveled 480 kilometers to Wenzhou, a region of China with a tradition of entrepreneurship. [Source: Jonathan Margolis, Times of London, January 2010]

Zhang is now a dollar millionaire and head of the Huamei garment Accessory Company, a supplier of many of the world’s buttons. Looking back on her early years as a pioneering entrepreneur she told the Times of London, “My classmates were ashamed of me for starting my own business. They would turn their heads away when passing my house and pretend not to know me.” On her first sale she said, “the first thing I sold was a toy watch. It was a sunny morning in May 1978, I bought it for 0.15 yuan and sold it for .20. I was very, very excited to make a profit. But I was also very nervous and very afraid the local government staff would come to stop it.”

Soon she expanded into ferry trips to Shanghai, needles, thread, elastic, buttons and was able to make two yuan a day, ten times the state wage. When officials first came to her house she feared the worst but was told what she was doing was alright in light of new reforms. The official said all she needed to do was fill out some forms and provide two photos and she could be legitimate, She was still hesitant, worried about what would happen if the policy changed and she was an record as being a capitalist.

Corrupt Millionaires in China

wedding fleet One Beijing businessman told the Los Angeles Times, “Chinese people are suspicious of anyone who gets rich. They think the only way to get rich is to know somebody and be in on an inside deal.” According to a 2011 edition of the respected Hurun Report, the richest 70 of China’s parliamentarians boast a combined wealth of 493.1 billion yuan ($75.1 billion). By contrast, the assets of the 70 most well-heeled members of the U.S. Congress add up to no more than $4.8 billion.

In 2001, Yang Rong was listed by Forbes magazine as the third richest man in China, with a net worth estimated at $840 million. He was the founder of the first mainland Chinese company to have shares sold on the New York Stick Exchange. In 2003, Yang was in hiding in California. In China he had been charged with “economic crimes” in connection with his management as CEO of Brilliance China Automotive, China’s largest minivan maker. Yang claims he was cheated by the government

In 2001, Yang Bin was listed by Forbes magazine as the second richest man in China, with a net worth estimated at $900 million. He was the founder of the Hong Kong-listed orchid grower Euro-Asia Agricultural Holdings and was appointed by Beijing to run a special economic zone in North Korea. In November 2002, he was placed under house arrest on tax evasion charges. In July 2003, he was sentenced to 18 years in jail for contract fraud, bribery, illegally occupying farmland, and forging financial documents.

Zhou Zhenghyi is a Shanghai tycoon and former snack-shop owner who was once listed as the 11th richest man on the Forbes China list with a fortune of $320 million. In 2007, he was sentenced to 16 years in prison on corruption charges and for faking documents and illegally using bank loans to speculate on the stock market.

Wang Xuebing, the head of the Bank of China, China’s second largest bank, was investigated for a questionable $23 million loan linked to Wang's wife.

Zhiu Yiming, the youngest person on the Forbes list of the richest people on China in 2005, was sentenced to life in prison for bank fraud. He is said to have forged financial reports to obtain a $48.5 million loan which he used to acquire a stake in major water and electricity supplier.

See Corruption

Bill Gates and Warren Buffett Try to Convince China’s Wealthy to Donate to Charity

buying car with cash In October 2010,Bill Gates and Warren Buffett hosted a private dinner for dozens of China’s richest people, encouraging them to donate to charities. The setting was said to be a full-scale replica of the Château Lafite, complete with Greek statuary, a moat and its own wild duckpond. [Sources: William Wan, Washington Post, September 19, 2010, The Guardian, Tania Branigan, September 29, 2010]

Many of the billionaires were initially excited about meeting Gates and Buffett but some of the them backed out of the dinner when it began circulating they might have to pledge large chunks of their fortunes to charity. When that happened the media and netizens began accusing the wealthy of being tight and questions were raised as to who was actually invited. “ [Ibid]

But as the case with many things in China all is not what it seems to be. Greed may have held some back but there was also the Communist Party to consider, Li Huafang of the Shanghai Institute of Finance and Law told the Washington Post, ‘One thing holding back philanthropy may be the reluctance among the rich. But the other is the worry of the government . They don’t want other entities competing with them for the people’s hearts.’ “ [Ibid]

Gates and Buffett, who have asked US billionaires to commit to leave most of their wealth to charity, wrote to guests to assure them the dinner was not a fundraiser. They said they merely wanted to promote charity development. Although he is not one of China’s richest men the actor Jet Li confirmed he would meet Gates and Buffett. Li is one of China's best-known philanthropists thanks to his One Foundation. He recently highlighted the difficulties such groups face when he said its future was uncertain due to its blurry legal status, telling state broadcaster CCTV that soon ‘it will be questioned by those who seek more transparency and professionalism in China's charity development’. “ [Ibid]

Debate Over the Stinginess of China’s Wealthy

destroying a Lamborghini The event and the response to it provoked a debate about the apparent stinginess of China’s billionaires. Critics argue that China's new rich have ignored their socialresponsibilities in the rush for wealth. Among the most scathing is one of last night's guests, Chen Guangbiao, who says Gates has inspired him to leave his fortune to charity when he dies. ‘This makes me so mad. How did we get so rich? We've had favorable economic policies and China's working class helped us get there. I think we need to repay society,’ he told NPR  even threatening to leak the names of those who had turned down the invitation. [Sources: William Wan, Washington Post, September 19, 2010, The Guardian, Tania Branigan, September 29, 2010]

Guangbiao—whose wealth was estimated at $440 million in 2010, and who made his fortune recycling materials such as steel and concrete— promised to leave all his money to causes such as education and environmental protection. Chen grew up poor in Jiangsu Province in a family that was so poor two of siblings died of malnutrition. At the age of 10 he paid for his schooling by selling cups of water for a fraction of a cent. He told the Washington Post, ‘My parents left me nothing, I made this fortune entirely on my own, so I have no fear for my son’s future. He can find his way as well.” [Ibid]

The richest man in China, beverage billionaire Zong Qinghou, expressed some skepticism about the requests saying he and others were a little put off by pressure for ‘donation pledges of rich men’s personal wealth.’ He told Phoenix television he had a previous engagement and said real philanthropy was creating wealth and jobs. ‘If I want to donate, I will; if I don't want to, I won't be persuaded to either. I don't think donating a lot of money is real philanthropy. It is just a way to get around the high inheritance tax and other taxes,’ he said. “ [Ibid]

Experts have suggested the rich fear exposing their wealth lest it attract envy, criminals and perhaps too much scrutiny of its origins. Even when they give, they prefer to do so privately. Wang Zhenyao, director of the Center for Philanthropy Research at BeijingNormal University, said high public expectations were another deterrent. ‘Many people think that no matter how much rich people donate, it is just not enough. That's wrong thinking: philanthropy is a voluntary act. In China there are now many rich people who fear to donate, because it will attract people's criticism,’ he said. [Source: The Guardian, Tania Branigan, September 29, 2010]

Increasing Generosity Among China’s Rich

Rolls Royce shopping But charitable giving is unquestionably on the up. According to the Hurun philanthropy list, the 50 most generous donors gave an average of $25m last year  eight times the average of the first list in 2004. And experts say China is seeing a revival of a domestic idea, rather than the introduction of a foreign one. ‘There is a history and tradition of philanthropy in China pre-dating 1949, but if you look after that the sector is underdeveloped. The Communist party basically nationalised philanthropy,’ said Shawn Shieh, visiting professor at Beijing Foreign Studies University. [Source:The Guardian, Tania Branigan, September 29, 2010]

It re-emerged when the government began establishing foundations and charities in the 1980s, with new regulations in 2004 paving the way for private foundations. ‘One obstacle is the mindset of the nouveau riche, the idea that they should think about giving their money to society. In the past, these entrepreneurs, if they donated money, donated it to government foundations as a way to improve their relations with officials or [for] public relations, showing they are working with government,’ said Shieh. ‘The second obstacle has been systemic  reflected in the lack of regulations that would promote the sector in an effective way. You have regulations but private foundations have restrictions placed on them; they can't publicly fund-raise, for example.” [Ibid]

Yu Pengnian topped the Hurun philanthropy list of China's biggest givers for five years - by giving away his whole fortune of $1.2bn (£760m). The 88-year-old began as a street hawker, and made his fortune in hotels before spending it on health (funding 150,000 cataract removals) and other good causes. “ [Ibid]

The Chinese custom and Confucian value has traditionally been to leave your wealth to your descendants and look after your family first. Chinese critics have argued it is unnatural for Yu Pengnian not to leave his wealth to hisfamily. His response: ‘If my children are competent, they don't need my money. If they're not, leaving them a lot of money is only doing them harm.’ Many have also said Chen Guangbiao—the 42-year-old recycling entrepreneur who has pledged to give all his money to charity when he dies— should help his brother and sister, a security guard and dish-washer respectively; he says he has tried to aid them, unsuccessfully. “ [Ibid]

China’s Wealthy and the Fear of Losing Their Money

According to the Economist, “Mainland China offers scant legal protection for private property. The rich, many of whom cut corners to get that way, know they could lose it all suddenly. Many also fear losing their political patrons next autumn, when China’s Communist Party will anoint a new generation of leaders. Small wonder they are seeking havens for their money and their families.

According to the Hurun Report, a wealth researcher, some 14 percent of rich Chinese say they have already left the country or are filling out paperwork to obtain a foreign passport. Another 46 percent are considering one of these steps. A recent report by Bank of America Merrill Lynch warned about the destabilising effects of “hot money” speeding out of China this year. Image Sources: YouTube2) Communist Elite, University of Washington; 3) Yang Huiyan and her family, China Daily; 4) Others, Hurun.com and Forbes

Text Sources: New York Times, Washington Post, Los Angeles Times, Times of London, National Geographic, The New Yorker, Time, Newsweek, Reuters, AP, Lonely Planet Guides, Compton’s Encyclopedia and various books and other publications.

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© 2008 Jeffrey Hays

Last updated October 2012