How have China’s wealthiest fared amid the pandemic and Xi Jinping’s drive for common prosperity? Rather well, according to two reports which suggest that China’s rich have only gotten richer.
The top 0.001 percent of China’s population — or about 14,000 people — now own close to 10 percent of national wealth, up from 6 percent in 2016, according to a new report by the World Inequality Lab, a research center at the Paris School of Economics co-led by the economist Thomas Piketty. Billionaires possess almost twice the amount of wealth held by the bottom half of the Chinese population.
Those findings are supported by the latest data from the Hurun Report, an organization that keeps tabs on China’s wealthiest. The data shows that China produced a record number of millionaires last year, with their aggregate wealth growing by 27 percent.
This week, The Wire looks at wealth in China: its magnitude, how it’s being spent and invested, and the yawning inequality gap that has only grown in the Xi era.
UNEQUAL, AND INCREASINGLY SO
Wealth inequality in China has consistently widened since the start of the country’s reform and opening up in the early 1980s, with the gap expanding dramatically since the early 2000s.
But the growth in the wealth share held by the top 10 percent slowed significantly around the time Xi Jinping came to power. The share held by the top 0.001 percent actually declined slightly starting in 2010, before recovering again by 2015.
Notably, the consolidation of wealth among China’s richest isn’t necessarily coming at the expense of the bottom 50 percent. Data collected by the World Inequality Lab suggests that the share of wealth held by the bottom half of China’s population has remained fairly stable since 2011, hovering around six to seven percent.
Instead, the wealth share concentrated in the hands of the top 0.001 percent seems to have come at the greatest expense of the rest of the top 10 percent, whose total share of wealth dropped 2.6 percentage points since 2011.
PORTRAIT OF WEALTH
Data from the Hurun Research Institutes paint a more detailed picture of the backgrounds and activities of China’s wealthiest.
In geographic terms, more than half of the 2.1 million “high-net-worth families” — defined as possessing net wealth of 10 million RMB ($1.4 million) or more — were located in five provincial-level regions: Guangdong, Beijing, Shanghai, Hong Kong and Zhejiang.
The four mainland regions saw year-on-year growth in the number of high-net-worth families in 2021; Hong Kong, meanwhile, saw a 5.4 percent decline, a reflection of the city’s population exodus since the start of the pandemic and the imposition of the National Security Law.
Entrepreneurs now account for only half of China’s high-net-worth families, down from 60 percent the year before. That could in part be a result of Beijing’s rolling crackdowns on a variety of private enterprises last year, from consumer technology companies to fintech and private education.
C-suite executives at large corporations and multinationals, meanwhile, now account for 30 percent of all high-net-worth families, up from 20 percent a year ago.
HOW IT’S BEING INVESTED
Hurun’s research also shows how China’s rich are spending and investing their wealth — and how those money flows may be evolving amid geopolitical tensions with the West.
Despite China’s strict capital controls — which cap the amount of foreign currency individuals can exchange annually at $50,000 per person — most high net worth families have parked significant amounts of their wealth abroad. Three in five of the households surveyed have between 10 and 30 percent of their wealth invested overseas. About half have $4 million or more invested abroad.
But the preferred destination for foreign investments is changing. Hurun surveyed families with existing overseas investments, and families which intend to invest overseas: among those with existing investments, the top four destinations for their money were the U.S., Hong Kong, Canada and Australia.
But fewer prospective investors rank the U.S. and Hong Kong as preferred destinations, amid worsening U.S.-China relations and the crackdown in Hong Kong, which has made the city less attractive for mainland Chinese families looking to stash their wealth overseas. Many instead are looking to politically neutral Singapore, as well as the U.K., where the recent fall in the value of the pound has boosted demand for property from Chinese buyers.
Eliot Chen is a Toronto-based staff writer at The Wire. Previously, he was a researcher at the Center for Strategic and International Studies’ Human Rights Initiative and MacroPolo. @eliotcxchen