Li Wangzhi, who had joined Citigroup after earning a master’s degree at Columbia University, was the first son of Bo Xilai, according to two schoolmates of Li and repeated on an online publication affiliated with the Ministry of Culture. Extended family members of Bo, then commerce minister and now ousted Chongqing Communist Party boss, have also had positions in such firms as alternative-energy company China Everbright International Ltd. (257), according to data compiled by Bloomberg.

While the accumulation of influence is commonplace among relatives of politicians worldwide, the Bo family fortune of at least $136 million may fuel perceptions of corruption in the Communist Party and deepen social tensions over China’s widening wealth gap. The party has sought to cordon off from politics the investigations of Bo and his second wife, arrested on suspicion of murder, with an official commentary stating that the inquiry is solely a matter of law.

“The danger for them, the Chinese, is that the whole of the Politburo and their Central Committee colleagues will be exposed as a new property-owning class,” said Roderick MacFarquhar, a Harvard University professor who focuses on Chinese politics. “It’s already got out of hand. The problem for the regime is that it is now out in the public sphere.”

Bloomberg earlier reported on the extensive business empire run by the sisters of Gu Kailai, Bo’s wife. Government investigators have been dispatched to Hong Kong to look into the family’s wealth, AFP reports. As the Hindu reports, the Communist Party is focusing on the corruption angle of the case to divert attention from reports of Party infighting:

Reflecting concerns that the purge of popular and influential Politburo member Bo Xilai could trigger divisions within the party, the CPC has launched in recent days a massive propaganda campaign, using both official media and microblogs, to mobilise public opinion against the charismatic Chongqing party secretary who was suspended for “serious discipline violations”.

The commentaries have been seen as an attempt to present the Bo Xilai case as a clear-cut corruption issue and not, as widely believed, a reflection of factional political infighting. The message is that the party is serious on cracking down on corruption.

“The government is saying that this is a corruption fight, and not a political struggle,” Qiao Mu, Director of the Centre for International Communication Studies at Beijing Foreign Studies University told The Hindu in an interview. “The problem is,” he added, “few people believe that”.

Back in Chongqing, abundant government spending during Bo’s administration has left the city heavily in debt, the Wall Street Journal reports:

“I don’t think it would be a stretch to say that Chongqing local government, state-owned enterprises and state-owned developers collectively owed 1 trillion yuan at the end of 2011,” says Victor Shih, an expert on China’s local-government debt at Northwestern University. That estimate, based on Mr. Shih’s own look through the records of Chongqing’s financing vehicles, would put local-government debt in Chongqing at 100% of gross regional product, far higher than the 22% level for China as a whole, according to numbers from China’s national audit office.

Chongqing, a smoggy city straddling the Yangtze and Jialing rivers, isn’t the only Chinese city to take on heavy debt to build roads and other infrastructure in a bid to energize growth.

But the city’s situation illustrates the tough choices facing the world’s second-largest economy after the U.S.’s, as many analysts and even some Chinese leaders warn that the nation’s traditional reliance on big government spending could leave its economy dangerously unbalanced and open to corruption. China is looking for way to increase domestic consumption to lessen its dependence on investment and exports.

Read more about Bo Xilai via CDT.

© Sophie Beach for China Digital Times (CDT), 2012. | Permalink | One comment | Add to del.icio.us
Post tags: Bo Xilai, corruption, gu kailai, Nepotism, princelings, wealth
Download Tools to Circumvent the Great Firewall

So where are the Chinese wealthy putting their money to use these days?

Xu Xin, president of Deer Jet, a subsidiary of the Hainan Airlines Group, told China Daily that he is very optimistic about the Chinese business aviation market due to the increasing number of rich people in China and their willingness to spend more on business jets.

Almost half of wealthy individuals intend to take part in training programs over the next three years, the paper reported. More than one-third of them like to attend conferences and lectures, while almost 30% taken part in executive MBA programs or further education classes. More than three-fourths of them feel that the biggest benefit they get from this sort of activity is in helping expand their social networks, according to the study.

Just because they’re rich, it doesn’t make them shopaholics. Having passed through the status seeking phase, many of China’s rich have now entered the stage of wealth preservation instead.

Read more about the findings in the White Paper via China Daily. See also more about wealth in China via CDT.

© Sophie Beach for China Digital Times (CDT), 2012. | Permalink | No comment | Add to del.icio.us
Post tags: consumerism, millionaires, savings, wealth
Download Tools to Circumvent the Great Firewall

In a country where many workers earn an annual income of around $1,500, parents paid up to RMB 60,000, or US$9,500, to send their children on whirlwind tours of the continent’s sights. In addition to holiday photos, the children were expected to bring home skills like eating with a fork and knife and learning the appropriate time to clap at a classical music concert.

If it’s school-vacation holiday in China, then it’s study-tour time in Europe.

Chinese tourists, some 3 million of whom visited Western Europe in 2010, have already remade the traditional European Grand Tour according to their own tastes and consumer culture. Typical stops include Paris for romance and Louis Vuitton; Switzerland for mountains and chocolates; German towns like Trier, the birthplace of Karl Marx; and Metzingen, home to several factory outlets and the headquarters of Hugo Boss.

Chinese travelers have also emerged as the travel industry’s knights in shining armor, riding to the rescue of Europe’s industries suffering the effects of stagnant economic growth. In 2011, Chinese travelers accounted for 62 percent of Europe’s luxury goods sales according to one estimate.

© Sophie Beach for China Digital Times (CDT), 2012. | Permalink | No comment | Add to del.icio.us
Post tags: children, Chinese tourists, Europe, tourism, wealth, wealth gap
Download Tools to Circumvent the Great Firewall

As year-end reports on 2011 emerge from companies and organizations around the world, an astonishing picture is building of extravagant, high-end Chinese spending that offers a glaring contrast to the hardscrabble, high-saving image of most Chinese.

Wealthy Chinese are snapping up gold, Rolls-Royces and yachts, Louis Vuitton, Chanel and Gucci faster than ever before, with increases registering not in baby steps, as a decade ago, but in giant leaps — 20, 50, even 80 percent, year on year. The Chinese have become the world’s biggest duty-free shoppers.

Where is all the money coming from?

Tantalizing research by Wang Xiaolu, deputy director of the National Economic Research Institute at the independent China Reform Foundation, based in Beijing, may offer a kind of Kepler telescope for viewing the economy at something like its true size.

Read more about wealth and poverty in China and the wealth gap through our special feature The Great Divide.

© Sophie Beach for China Digital Times (CDT), 2012. | Permalink | One comment | Add to del.icio.us
Post tags: gray economy, luxury, statistics, wealth, wealth gap
Download Tools to Circumvent the Great Firewall

This week’s announcement that Italy’s Ferretti Yachts will soon be under Chinese ownership is the latest example. China’s state-owned Shandong Heavy Industry Group Co. said it will buy a 75% stake in the yachtmaker in a deal worth EUR374 million.

China’s elites are rabid consumers of the good life and luxury fashion labels have been cashing in. In addition to watches and handbags, China’s rich are spending on leisure pursuits too. High-end hotel chains in Asia in particular report a rapid increase in the number of Chinese tourists – as much as a twenty-fold surge at one resort in the Maldives since 2008.

As the post points out, the yacht industry is not alone in attracting Chinese investment: Last week, The Wall Street Journal reported that Indian property developer DLF was close to selling high-end hotel chain Aman Resorts to Chinese bidder HNA Group.

© Scott Greene for China Digital Times (CDT), 2012. | Permalink | No comment | Add to del.icio.us
Post tags: luxury, wealth, yachts
Download Tools to Circumvent the Great Firewall

To find out how China’s wealthy feel, one actually has to analyze wealthy people, not those in the middle. There are over one million people with more than $1 million in investable assets, and 271 billionaires, according to data from the Hurun Report.

Any analysis needs to look at that segment to determine the trends among wealthy consumers. My firm in the past two months interviewed several dozen people with more than one million dollars in investable assets, as well as a dozen people worth more than $10 million.

The results show the ultra rich, people worth more than $10 million, are actually getting richer and remain very confident about their earning ability and those worth more than one million dollars also reported being very confident. The vast majority reported that they planned to spend at the same or higher level in 2012. One businessman in the services sector in Shanghai told me, “The economic problems are serious but we expect profits to rise by 30 percent next year. Even if profits don’t go up, I plan on spending at the same levels or more.”

The Financial Times reported on Sunday that China has propped up the sales figures and stock prices of the world’s luxury retailers, from Hugo Boss to Burberry to Louis Vuitton, with analysts expecting the boom to continue as more big names charge in to offset stagnating sales figures at home. See also previous CDT coverage of the demand for luxury goods among China’s nouveau rich, including expensive cars and superyachts.

© Scott Greene for China Digital Times (CDT), 2011. | Permalink | No comment | Add to del.icio.us
Post tags: consumer spending, domestic demand, luxury, wealth
Download Tools to Circumvent the Great Firewall

State-controlled media portray China’s leaders as living by the austere Communist values they publicly espouse. But as scions of the political aristocracy carve out lucrative roles in business and embrace the trappings of wealth, their increasingly high profile is raising uncomfortable questions for a party that justifies its monopoly on power by pointing to its origins as a movement of workers and peasants.

Their visibility has particular resonance as the country approaches a once-a-decade leadership change next year, when several older princelings are expected to take the Communist Party’s top positions. That prospect has led some in Chinese business and political circles to wonder whether the party will be dominated for the next decade by a group of elite families who already control large chunks of the world’s second-biggest economy and wield considerable influence in the military.

“There’s no ambiguity—the trend has become so clear,” said Cheng Li, an expert on Chinese elite politics at the Brookings Institution in Washington. “Princelings were never popular, but now they’ve become so politically powerful, there’s some serious concern about the legitimacy of the ‘Red Nobility.’ The Chinese public is particularly resentful about the princelings’ control of both political power and economic wealth.”

See also an interactive graphic accompanying the report, which showcases a family tree of China’s past and present leaders and their offspring, and read more about China’s “princelings”  – including Bo Guagua – via CDT.

© Scott Greene for China Digital Times (CDT), 2011. | Permalink | No comment | Add to del.icio.us
Post tags: Bo Xilai, CCP legitimacy, princelings, ruling elites, social stability, wealth
Download Tools to Circumvent the Great Firewall

In private conversations, many of the people who supposedly make up the ruling elite of China express serious misgivings about the direction and future stability of the country, while admitting that they feel largely powerless to affect meaningful change.

“There is a sense that we are approaching an inevitable breaking point, when the pressures in society will boil over and consume the rulers,” says one Chinese banker with close ties to a number of powerful political families.

Excerpts of the article have been posted on Flashman Letters blog.

A recent article in the Sydney Morning Herald looked at members of China’s “princelings” who are speaking out against corruption and other ills in the Communist Party.

© Sophie Beach for China Digital Times (CDT), 2011. | Permalink | No comment | Add to del.icio.us
Post tags: princelings, ruling elites, social stability, wealth
Download Tools to Circumvent the Great Firewall

Yesterday noon at 12:44pm Weibo user @巴蜀秀才 posted on the road claiming that “17 million, to construct this broken boat, dived as soon as it entered the water, isn’t that ridiculous??” the accompanied pictures showed that a boat capsized on the Yellow River, with the stern and the rear-half of the ship in the water, the bow of the ship pointed up 30 degrees. In just a few hours this Weibo had been reposted over 3,400 times.

Yesterday afternoon, reporters contacted Lanzhou city Ministry of Transportation Propaganda chief surname Qiao, who verified this event and explained that “the cause of the event was due to improper handling from the builders who mistakenly estimated the water level causing the water level to exceed the limit, leading to the rear half of the ship to take on water and sink.” October 2nd, the boat was pulled from the water, and is currently under repair. Chief Qiao stressed, the builders should bear the main responsibility for this incident, and that this incident did not produce any casualties, while expressing that, “currently the boat is undergoing repairs and it is estimated that it will launch again in a month.”

Chief Qiao also stated, this boat’s builder is a shipbuilder from Sichuan. But reports showed that “SS Jiugang” commenced construction at Xiaoxia Shipbuilding at Gaolan in Gansu Province, while on September 8th reporters saw the nearly completed “SS Jiugang” at a reservoir at Gaolan County. At the time the ship wheel, gauges and other instruments have been completed. This is contrary to Chief Qiao’s assertion that it was built in Sichuan.

Video of the event surfaced on Sina.com.

As China’s rich get richer and its luxury industry appears primed for expansion, local yacht makers have jumped in the water with their western counterparts. Some are export-oriented manufacturers for international brands that turned inward during the financial crisis and built up their own domestic brands, according to a report last year in the China Daily.

Even provincial governments are jumping on board, though at their own peril.  Last week, AFP detailed online outrage towards officials in Zhejiang who claimed they used government funds to purchase a yacht for the purposes of tax collection:

The zjol.com.cn news website, which is run by authorities in Zhejiang, quoted tax official Fang Yongjun as saying the yacht’s two decks had been converted for use as a tax collection office.

The tax bureau needs the yacht because many local businesses operate on the Thousand Island Lake, a national tourist area, the report said.

It quoted the yacht’s builder Ma Xiaochun as saying the 2.71 million yuan ($555,000) price tag was low compared with other boats on the lake.

But netizens were unconvinced. “Do they need a helicopter for tax collection in the mountains?” asked one web user on Netease.com, a popular Chinese portal.

Public spending has come under growing scrutiny this year after Beijing ordered central government departments to publish details of their expenditure on cars, foreign trips and receptions.

See additional CDT coverage of China’s wealthy elites and how they spend their fortunes on art collections, cars and fake helicopters.

© Scott Greene for China Digital Times (CDT), 2011. | Permalink | One comment | Add to del.icio.us
Post tags: government spending, Information Revolution, luxury, netizens, sina.com, wealth
Download Tools to Circumvent the Great Firewall

The four-day Hainan Rendez-Vous brought together luxury brands catering to various market segments, like Martell Cognac and Maserati, with business-jet makers and international yachting brands, like Azimut, Ferretti Group, Feadship and Lürssen.

“Encouraging Chinese to own yachts is the biggest challenge this industry faces,” said Tork Buckley, a founder of Big Blue Consulting, which consults shipyards and clients on new construction build and refit specifications. “God knows, they have the money.”

For now, the first thing China’s new rich think about buying “is a name-brand watch, a Ferrari, an apartment,” said Mr. Buckley, who is also the Asia editor of the magazine The Superyacht Report. “They’re not thinking of yachts, yet.”

“Hainan goes a long way toward helping that because it puts Chopard next to Lürssen,” he added, referring to the Rendez-Vous event. “They know Chopard, but don’t know Lürssen, and that builds Lürssen’s brand.”

Along with international yacht-manufacturer brands, the Hainan event also attracted home-grown brands, including Kingship and Heysea Yachts, which are just starting to flex their muscles, especially in the super-yacht category.

© Sophie Beach for China Digital Times (CDT), 2011. | Permalink | No comment | Add to del.icio.us
Post tags: luxury, wealth, yachts
Download Tools to Circumvent the Great Firewall