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

According to eyewitnesses, Li’s son, who was driving a BMW without a driver’s license, attacked the couple with another man within minutes allegedly rear-ending their car, beating them and shouting, “Who dares dial 110!”

For many Chinese, this incident bore eerie echoes of the “Li Gang case” of October 2010, in which the son of an influential police official in Hebei Province struck two university students with his car, killing one, while driving on campus. When finally stopped, the young man threatened others saying, “My father is Li Gang!” These words became a slogan in China summing up the problem of corruption, abuse of power and disproportionate privilege among government leaders and other elites and their family members.

The broader issue of privilege among China’s second-generation political and business elites is encompassed in two terms now widely used, the “power progeny” or “second-generation [of] officials” (官二代) and the “second-generation rich” (富二代). Li Shuangjiang’s son would be considered a prime example of the latter, as would Lu Xingyu (卢星宇), the daughter of billionaire Lu Junqing (卢俊卿) who is now embroiled, along with her father, in a scandal of her own.

In the lead editorial in today’s edition of The Beijing News, the term “second-generation rich” is not used explicitly. But the editorial deals generally with the issue of privilege and inequality of opportunity in China and what they mean for society.

© marlies ruck for China Digital Times (CDT), 2011. | Permalink | No comment | Add to del.icio.us
Post tags: Li Gang, Lu Junqing, Lu Xingyu, second-generation rich, wealth
Download Tools to Circumvent the Great Firewall

China now has the second most billionaires in the world, after the United States with more than 400.

“The numbers are growing much faster than people expected,” said Rupert Hoogewerf, the founder of the list, who added there could be the same number of billionaires again who are off his radar, keeping their assets as quiet as possible.

“In the past few weeks, I have also been speaking to a number of people who have cashed out of their first empires and are busy building their second,” he said. “Many billionaires are also much more comfortable in their skins. The shareholder structures of their companies are becoming clearer and clearer and many of them are also co-opted into the political system.” Mr Hoogewerf said part of the reason for the huge increase in the numbers of super-rich had been a wave of stock market flotations, despite the financial crisis.

Read more about the individuals on the list and how they made their money, from the Christian Science Monitor:

In a survey of China’s richest citizens published Wednesday, the top spot went to a man whose company makes the heavy machinery used to build apartment blocks. Second spot went to a soft drinks manufacturer. Third spot to the country’s leading Internet entrepreneur.

Liang Wengen, China’s new richest man according to the Hurun Rich List, saw his fortune balloon this year along with the value of the company he founded, the Sany Group. He owns 58 percent of the firm, the biggest manufacturer of concrete pumping machinery in the world.

The Forbes China Rich List will be released on Thursday.

© Sophie Beach for China Digital Times (CDT), 2011. | Permalink | One comment | Add to del.icio.us
Post tags: billionaires, rich list, wealth
Download Tools to Circumvent the Great Firewall

With China’s economy booming, art collectors there have become an increasingly powerful force in the market, demonstrating a growing interest in Western as well as Asian art.

At Sotheby’s spring sale, a Chinese buyer bought the evening’s priciest painting — Picasso’s “Femme Lisant (Deux Personnages)” — for $21.3 million. In March, at the auction house Lebarbe, in Toulouse, France, a Chinese buyer set a new French record for Chinese art with a $31 million bid on a scroll painting from the Imperial Palace in Beijing. Last year an anonymous telephone bidder who was believed to be Chinese paid $106.5 million for Picasso’s “Nude, Green Leaves and Bust” at Christie’s, a record for a work of art at auction.

Chinese auction houses are now selling works at a pace formerly associated with those in London and New York. One company that tracks the fine-art market, Artprice, reported that they were responsible for some $8.3 billion in sales, which would make them the world leader.

“We have seen exponential growth by mainland Chinese buyers who were brought up during the Cultural Revolution,” said Henry Howard-Sneyd, Sotheby’s vice chairman for Asian art. “These are successful business people with huge amounts of money at their disposal.”

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