According to Hurun’s most recent data, and in Chinese yuan terms, the country had 875,000 multi-millionaires and 55,000 billionaires last year – 6.1 per cent more millionaires and 7.8 per cent more billionaires than in 2009. More than 50 per cent of the mainland’s wealthiest, who each have assets of more than 10 million yuan (€1.15 million), spend between one million yuan (€115,000) and three million yuan (€230,000) every year, and own more than three cars. These cars – the white BMW 7-Series, the black Audi A6 models with extended wheelbases, the Porsche Cayenne SUVs – throng China’s fabulous new network of motorways. Rupert Hoogewerf, publisher of the Hurun Report, which counts China’s wealthy and analyses what they do, lists off the brands favoured by the country’s rich: Patek Philippe watches, Mercedes E-Class cars, Gulfstream jets, Armani suits, Azimut yachts and Louis XIII brandy. This is the luxurious reality behind the 10.3 per cent increase in China’s gross domestic product (GDP) last year. Half of the richest people on the Chinese mainland are spending at least a million yuan (US$115,000) a year. Rupert Hoogewerf, head of the Hurun research group, says this shows that luxury brands have a very special place here. “Lots of people like to receive luxury brands to improve their status. It’s a noticeable trend,” Hoogewerf says. “The time for China to learn from Europe is over. People here are becoming better educated. They are getting to know luxury brands that are not even familiar to some Europeans.”
Ni Xiao owns a chain of shops and spends a lot of his money on the stock market. “My monthly outgoings are about 100,000 yuan [€11,500], which I spend on eating, entertainment and my girlfriends. I travel a lot to the US. I probably spend about a third of my time there. My annual income is about four million yuan [€460,000], and I own a few apartments in Beijing and Shanghai.”
Zhang Hongli, marketing manager of a publishing company, owns two apartments in Beijing and one in her home town, in Hubei province. “I never spend more than 100,000 yuan [€11,500] a year on luxury items, which is about a third of my income,” she says.
Zhang Yue, an actor , spends between 30,000 yuan [€3,500] and 50,000 yuan [€5,800] on shopping each month. “Most of this is on luxury brands, because as an actress I need it. Together my husband and I spend about a million yuan [€115,000] a year, and we change our cars frequently. My annual income is more than 500,000 yuan [€58,000], and we own five or six apartments here in Beijing."
Mr Yang, a marketing manager in a foreign company, “My monthly expense is around 30,000 yuan [€3,500], and my annual income is around 600,000 yuan [€69,000]. I seldom buy luxury things for myself, but, as all girls love Louis Vuitton bags or Chanel, sometimes I buy this for my girlfriend. My expense on luxury things is about 100,000 yuan [€11,500] to 150,000 yuan [€17,300] per year.”
What China’s wealthy people like to buy most of all is property. Their main investment choice is real estate. About €310 billion was spent on land transactions in 2010, a 70 per cent rise on the previous year. The biggest jump in property prices was in Beijing, where they rose 42 per cent, with the average price 20,328 yuan (€2,345) per square metre. Shanghai’s price hike ranked second, with 40 per cent, although it is the most expensive market, with prices reaching 22,261 yuan (€2,561) per square metre, and €24 billion worth of residential properties were traded, despite government efforts to cool the market. Prices in the southern boom town of Shenzhen rose 33 per cent last year, and they were up 23 per cent in Guangzhou.
With inflation running at about 5 per cent, there is no point keeping your money in the bank because the deposit rate is only about 2.5 per cent. So people look for other investment vehicles. With the stock market looking pricey, the classic investment is property. Much of the rise of the market is attributable to China’s incredible process of urbanisation. China has seen the number of city dwellers rise from 18 per cent of the population in 1978 to 46 per cent in 2008, a rise of 28 per cent in three decades. About 300 million Chinese now living in rural areas – the equivalent of the population of the United States – will move into cities in the next 20 years, and by 2025 at least 220 Chinese cities will likely have more than a million inhabitants.
"...there is a conflict between supply and demand. In the past four or five years the number of new apartment buildings in Beijing is falling, probably by about 60 per cent, while demand has doubled or trebled. So for sure the price will go up. People’s incomes are rising; the numbers of people moving to the city is rising. People about 30 years of age need a home, want to start a family, but their parents are still young, and they don’t want to share with them. So what do you do? And with the move from the rural areas and villages to the cities in recent years, more and more people are here in the big city. With such huge demand in a city such as Beijing, where land is limited, demand is sure to rise" explains Jiao, who has managed a property agency for the past 14 years.
Mao Yushi is one of China’s best-known economists and a director of the Tian Ze Economic Research Centre. “We have a lot of problems now, for example the real-estate bubble,” he wrote on his blog. “Much of the increase in GDP is actually because of this bubble. When one building sells at an incredibly expensive price, beyond the normal market price, it is a distortion, which inflates the bubble in the real-estate market. This bubble relates for sure to a series of macroeconomic policies, including the savings made from having the renminbi [or yuan] currency at a low exchange for a long time.”
Brian Lucey, associate professor of finance at Trinity College Dublin, says “There is some research out there looking at housing and asset prices in China, and there are indications that the property market is somewhat overvalued in China. The question is whether that could be a major problem, and that I don’t know. It could be that it doesn’t go to the heart of the economy and could be absorbed by the broader economy...They are coming up against the limits of freedom to manoeuvre in controlling the political economy.”
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