China’s Billionaire Boom Nothing Short of a ‘Phenomenon’: UBS

Welcome to “The Chinese Century.” You’re already living in it.

That’s the surprising title and conclusion of UBS’s fifth annual survey of billionaires. The venerable Swiss bank, with $2.3 trillion in assets under management, analyzes the landscape of the super-super-rich once a year. This year, it comes to the conclusion that the next generations of Rothschilds and Rockefellers are actually Huangs and Qings.

This year’s survey—dubbed in full “UBS/PwC Billionaires Insights report: New Visionaries and the Chinese Century”—has primarily been covered from the Western perspective, with the focus usually on U.S. and European billionaires. But the real story is that “there are already more billionaires in Asia”—most of them Chinese—than in all of the U.S. And UBS is betting that in China, which is minting billionaires at the stunning rate of two a week, a recent economic slowdown won’t be enough to halt the boom.

What does this all mean for the businesses of luxury fashion and travel? A great deal. It’s not that the billionaires are the ones buying up duty-free Gucci at the airport, but this global wealth boom is spurring aspirational spending sprees among China’s huge upper-middle-class. And it’s their spending that’s, in turn, birthing those billionaires.

While rankings differ, some of the richest men in China include retiring chairman of e-tailing giant Alibaba Group Jack Ma, Tencent Holdings CEO Pony Ma, and Google and Microsoft veteran Huang Zheng, who this summer took his buzzy e-commerce venture Pinduoduo public.

UBS notes that the Chinese billionaires are throwing the old way of doing things out the window. “Encouraged by their country’s rapid growth, the Chinese are proving restless innovators and disruptors.” In 2017, venture-capital funding for startups in the U.S. and China was even. But China had claimed four times as many artificial intelligence-related patents and three times as many blockchain and crypto-related patents as of 2017. Their billionaires are younger, too.

UBS calls all this nothing less than a “phenomenon.” According to the 32-page report, “China’s billionaire entrepreneurs are leading their country’s economic transformation, and by extension that of the rest of Asia. Over little more than 10 years, they have created some of the world’s largest companies, raised living standards and made fortunes at an unprecedented pace.”

How did this boom of new wealth come about? “After several years in the making, in 2017 the growth of China’s e-commerce and technology businesses exploded,” notes UBS. Globally, billionaire wealth enjoyed its greatest-ever increase in 2017, rising 19 percent from the previous year to $8.9 trillion among 2,158 individuals in 43 countries that UBS/PwC studied.

But while Russia and Brazil also have pockets of great wealth, UBS said, “[T]he contrast to China could not be greater. Neither Russia nor Brazil enjoys conditions so conducive to entrepreneurial activity–a huge population, highly supportive government policy, rapidly liberalizing economy and major technological change.”

It’s not all happy news, however. China’s billionaires have a higher turnover—106 people became billionaires but 51 dropped off the list this year, illustrating the risks of doing business in China, the bank noted.

What’s most interesting? In recent weeks, signs of an economic slowdown in China and a softening of global stock markets has trimmed the optimism of many China believers. But not UBS.

“While a trade war or any other source of instability would slow the structural transition of China’s economy, it would be unlikely to halt the plans of the country’s young new entrepreneurs,” UBS concludes. “Fluctuations in the country’s economic growth will alter their rate of progress, but urbanization and the catch-up in productivity due to technology will continue to offer fertile conditions for entrepreneurs to grow and monetize their businesses.”

Categories

Wealth