China’s cohort of wealthy families has seen its ranks and fortunes dwindle, according to the latest findings from the Hurun Research Institute, as reported in the South China Morning Post.
By January of the preceding year, the tally of affluent Chinese households — those boasting assets in excess of 6 million RMB ($833,484) — had receded by 0.8%, to stand at 5.14 million. This is the second annual contraction in 15 years, underscoring the economic changes confronting the world’s second-largest economy, including a pandemic hangover, real estate woes and volatile geopolitical tensions.
Closer inspection reveals a more pronounced erosion among the upper echelons of wealth. The number of families with assets surpassing 10 million RMB ($1.39 million) diminished by 1.3% to 2.08 million, while those in the ultra-high-net-worth bracket — assets exceeding 100 million RMB ($13.9 million) — contracted 3.8% to 133,000.
But this phenomenon extends beyond China’s borders, with the global population of ultra-high-net-worth families, defined as possessing assets over $30 million, declining 4.5% to 88,000.
Rupert Hoogewerf, chairman and chief researcher at Hurun Report, attributed these fluctuations to the “pandemic and a shifting geopolitical landscape,” which introduced a layer of uncertainty to global economic trajectories and impacted private wealth to varying degrees across nations.
China’s era of ‘common prosperity’#
The report emerges amid initiatives by President Xi Jinping aimed at mitigating inequality through the country’s “common prosperity” drive, which seeks to foster socio-economic parity in a nation where wealth disparities have widened significantly since the late 1970s. Big corporations like JD.com have already voluntarily addressed this with internal wealth redistribution programs.
This backdrop is further complicated by Beijing’s announcement of a modest GDP growth target of around 5% for 2024, amid concerns over deflation, waning business confidence, and a protracted slump in the property market.
Despite the contraction of wealthy families in China, they have still amassed wealth of 158 trillion RMB ($21.9 trillion), representing 1.3 times the nation’s GDP, underscoring their considerable economic footprint. Almost all billionaires (98%) in mainland China are self-made, according to UBS’ Billionaire Ambitions Report 2023.
Geographically, the wealth of affluent individuals and families is concentrated in first-tier cities and the more economically vibrant southern and eastern regions, with Beijing, Shanghai, and Hong Kong leading in terms of affluent, high-net-worth, and ultra-high-net-worth households, respectively, Hurun finds.
Then there’s also the question of generational changes as the first generation of self-made wealthy in China is retiring and passing on fortunes to children.
“The sheer volume of wealth transferring to younger generations creates a massive customer base with significant spending power. This translates to increased demand for high-end goods, services, and experiences across various categories,” Michael J. Oliver, co-founder of Global Partnership Family Offices (GPFO), told Jing Daily in January this year.
While China’s affluent clientele still drive much of global luxury, there is a visible and measurable change in attitudes, with clientele becoming more discerning, and investment, quality and resale minded, rather than blindly following passing trends or spontaneous shopping.
Invitation-only VIPs salons by Louis Vuitton, Chanel, Dior and Hermès started popping up years ago in China to serve these luxury high spenders. In fact, the changing trend of preferences and values extends to much of Asia’s lifestyle consumers, as found by a just released study by the Bluebell Group.
This retrenchment among China’s wealthy, while reflecting broader economic challenges, poses pertinent questions about the government’s strategies to navigate and address these complexities. The implications for luxury goods, services and experiences in sectors such as fashion, beauty, hospitality are far and wide ranging.