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China Wealth Update

By John Dietz - Email Editor

Date : March 16, 2010

Dear Valued Reader,

A conference in China finds me on a final approach to Beijing Capital International Airport. The scenery is one of horizon-spanning agricultural plots virtually indistinguishable from the great plains of the US Midwest, save for the dormitory-style housing structures instead of single farm homes. But once in Beijing all human behavior is focused on industry - as in industrious. Despite the bitterly cold day, Beijing is like a beehive, buzzing with street vendors, commuters, and surprising (to me, at least) masses of tourists spending their foreign currency. It’s clear from the moment you arrive that this is a city in a hurry to make money.

The “north capitol”, as its name translates from Mandarin, is quickly becoming the center for commerce in Asia. According to the Chinese National Bureau of Statistics real estate in China’s 70 major cities in February rose 10.7 percent year-on-year, reaching a 21 month high. In the bigger cities, such as this one, the growth rates are off the charts - 50 percent in many instances. It is difficult to find a home priced under 1 million RMB (currently 146,470.79 USD).

Other economic indicators are also hard to ignore. Export rates are up 46 percent year-on-year, and imports surged by 44.7 percent. It looks like the recovery from the crisis of 2008 is, at least in China, a v-shape. The more interesting part of the story is that China’s trade surplus has begun to change, so much so that the Ministry of Commerce had warned that the nation could have a trade deficit soon.

What is happening in China today? The economic reality of wealth is taking shape. Just about all the wealth is first generation. According the Hurun Group, there are now over 825,000 millionaires and 130 billionaires. The average age of a person on Hurun’s “Wealthy List” is 50, a full 15 years less than the rest of the world.

43-year old Wang Chuanfu of BYD is the richest man in China with wealth of US$5.1 billion, followed by paper queen Zhang Yin, who had a rollercoaster of a year. The arrest of last year’s richest man and hostile government takeover of last year’s second richest man meant there were seven new faces in the 2009 Top Ten, representing the biggest shake-up of the Top Ten since the rankings began in 1999.

According to the Hurun Report the top 10 richest people in China

As of April 2009

Hurun also reports on the top 10 richest self-made billionaire women in the world. It is worth noting that 5 of the top 10 on the list are Chinese.

But success does come at a price; the Chinese are now starting to see similar divorce rates as their western counterparts. Chinese mothers, who still have a large influence on the person their daughter may marry, are increasingly vocal about suitors’ balance sheets, and it’s becoming a social prerequisite that the prospect own a residence.

February 14th rang in Chinese New Year and along with it the Year of the Tiger. The Tiger is the 3rd sign in the Chinese Zodiac cycle and it signifies bravery.

You’ll find no shortage of conflicting information in the media regarding China and its relationship with the US and the rest of the word, and some of it is even accurate. When convenient Beijing plays down China’s massive global impact (Darfur), then pivots in a flash to flex newfound US-debt-fed muscle (USA-Taiwan arms sale). With China’s current GDP at a little over half of the US and 1.3 billion people all eagerly demanding the good life, continued growth is certain. China has many challenges on its hands, none the least of which are government policies that affect over 1.3 billion people domestically, and by proxy through economic power, the rest of the world.

On this trip, I met with many Westerners; Germans, French, English, Americans and others who speak fluent Mandarin. My observation: the world is coming to China, if for no other reason than to offer their goods and services. You don’t need much market share to profit in a land of 1.3 billion people.

The conclusion: China has arrived as a consumer market of the first order, and your product probably needs to be here. But you can’t get a grip on China unless you see it firsthand. Take a trip, send me an email, and let me know your thoughts. …

Until next time,

By John Dietz

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