Fact of the Day: Number of China's Rich X9

The wealth gap in China is getting even bigger with even more wealthy people

A private survey has found the number of rich people in China has risen nearly nine times in a decade.

Those with at least 10 million yuan of investable assets hit 1.6 million in 2016, up from 180,000 in 2006, according to the 2017 China Private Wealth Report by Bain Consulting and China Merchants Bank.

The overall value of the private wealth market rose to 165 trillion yuan last year, growing 21 percent annually from 2014-2016. It's expected to reach 188 trillion yuan this year.

The rich spend a lot of money on luxury and invest abroad

There are about 120,000 "high net worth individuals" who had at least 100 million yuan worth of investable assets, up from fewer than 10,000 people in 2006.

The percentage of rich people with overseas investment rose to 56 percent this year, up from 19 percent in 2011.

The top four destinations for investment were Hong Kong, the United States, Australia and Canada, though Hong Kong's popularity fell 18 percent and the US fell 3 percent from 2015-2017.

Respondents said their top reasons for investing overseas was to diversify risks, capture market opportunities and migrate.

The wealthy are concentrated in major cities and coastal areas, but the survey found 22 provinces have at least 20,000 high net worth individuals.

One thing wealthy Chinese can't buy is class...

One can't help but wonder if this wealth amassed in a short period of time is due to loose credit from banks and they've taken advantage of this to invest in real estate and other appreciative assets.

The other possibility is investing early in property and it has significantly appreciated within a decade.

Either way it's a staggering number of nouveau riche in China who are looking for places to spend their money. They are definitely looking overseas for greater security and better living environment.

Anyone who has the access to some kind of wealth are trying to get it out of the country through investing in insurance products or real estate.

But the one thing they can't buy is sophistication and manners.

Worry about the Next Generation

Who's going to take over Dalian Wanda if Wang Jianlin's son won't?

Economists must find it interesting to watch how businesses develop in China, as private companies only began running again three decades ago.

As we have seen, some family-owned businesses have flourished spectacularly, the best example of which is Dalian Wanda run by Wang Jianlin, who recently purchased World Triathlon Corporation, which runs Ironman Triathlon Races for $650 million.

However, Wang's son, Sicong, has already said he does not want to take over the cinema and property conglomerate.

Wang Sicong's dog has two Apple watches. Does yours?

Maybe he's too busy playing with his dog, whom he recently purchased two Apple watches for each front paw.

However Wang Sicong is not alone in refusing to join the family firm. A study has found that only one in five of the mainland's second generation is keen to take over, which may spell trouble in the next decade.

The majority of second generation rich or fuerdai (富二代) would like to start their own business, while the rest would rather take traditional career paths.

The research was conducted by Peking University's Guanghua School of Management, and led by its associate dean, Professor Jin Li. The school is also launching a program in conjunction with the University of Oxford and Harvard Business School, aimed at executives of family businesses in China.

"Chinese family businesses are at a historic turning point," says Eric Thun, an associate professor in Chinese business studies at Oxford. "At the same time as confronting the challenges in the domestic market that are common to all Chinese firms, many are making leadership transitions from the first to second generation."

The study covered two years, based on interviews with more than 500 family-owned Chinese firms. Only 20.5 percent of those surveyed expressed an interest in following in their parents' footsteps, while nearly 70 percent wanted to start their own business; the rest wanted a traditional job like a doctor or lawyer.

Wang Sicong has set up his own gaming company

This latest finding spells trouble for China's economy because family-run businesses play a major role, with more than 85 percent of the country's private companies are family-owned. By July last year 747 of these firms were listed on the mainland stock exchange.

It's also an interesting contrast to family-run businesses in Europe and North America that have gone through several generations; but if not many second generation kids in China don't want to take over the family business, what's going to happen?

As expected, the profiles of the fuerdai reveal more than half of them have studied abroad, two-thirds of which majored in business management -- knowledge that would serve them well in guiding the family firm forward.

However, the study found many appeared to lack self confidence in dealing with businessmen from their parents' generation as well as senior staff within their family firm's management.

Another important issue is the kids feel too much pressure in living up to their parents' legacies, which could threaten business stability, the report said. This is the opposite thinking of the parents, who are focused on the best interests of the family and have high expectations for their child -- only child in most cases.

About two in every five entrepreneurs hoped their children would take over the business, while 55 percent said they would allow professionals to manage the company, but still have the family has main shareholders.

It sounds like there is no real nurturing of children to grow into the family business. In many multi-generational family businesses, young children are always encouraged to help out on the weekends or summer holidays, not just to have an extra pair of hands, but to see how they like the work.

And with many studying business management, but instead wanting to do something else may indicate the parents were trying to plan their children's career path without the kid having much say in what they wanted to study in university.

But the intimidation the fuerdai feel in taking over the business is palpable -- Chinese parents always seem to have very high expectations, sometimes to the point of being unrealistic. Wang Sicong has had a habit of shooting his mouth off, making outrageous comments that must leave his father red in the face with embarrassment.

So in this case maybe it's a good thing Sicong has decided not to take the reins of the family business...

Lifestyles of the Rich and Famous

Wang Sicong considers himself "tall, rich and handsome"... is he?

On Valentine's Day, the son of China's second-richest man told the media that his top criteria for finding a girlfriend was that she had to be "buxom".

The 26-year-old Wang Sicong was educated overseas from grade one and when he came back to China, his father, Wang Jianlin appointed him director of Dalian Wanda Group, a property and entertainment empire, without having any particular job description or responsibilities. The younger Wang is also chairman of a private investment firm called Prometheus Capital and runs a gaming company.

But he is best known for making outrageous comments on social media, usually verbal jousts at other fuerdai or second-generation wealthy elite. In 2013 he got into an argument with Wang Xiaofei, the son of celebrity chef Zhang Lan, accusing Wang of "impersonating a fuerdai" and being a "fake hipster" because his mother had retained her seat on the Chinese People's Political Consultative Conference despite renouncing her Chinese citizenship.

Ouch.

Father Wang Jianlin went on TV to defend his son's antics

Wang Sicong also considers himself a "gaofushuai", or literally "tall, rich and handsome"; he also likes to point out he is different from "diaosi", a self-mocking term referring to young men of humble backgrounds and low incomes.

Basically he's a spoiled brat to the nth degree.

In the days following his Valentine's Day remarks, Xinhua skewered the younger Wang, saying he was "breaching the bottom line of morals". It also said he was spreading "undesirable obsessions with money, sex and violence".

After Xinhua slammed Wang, he claimed what he said about women was a joke and couldn't believe that people took it seriously.

But his father has taken the criticism to heart and last night went on state television to publicly defend his son.

Wang Jianlin said his son had spent many years studying overseas and had gotten into the habit of speaking whatever was on his mind.

"He is smart. He went overseas to study at grade one and he has a Western-style of thinking. Maybe after spending five or eight years in China, he will truly become Chinese."

Will the younger Wang ever truly become Chinese after having studied abroad since he was six years old? This is naive thinking on the father's part. To believe that his son can have a Western education but without the other cultural aspects that go with living in the West is wishful thinking.

And for the father to denounce the West for casting is son astray is outrageous -- if his son was brought up with good family values and manners, this entire incident would not have erupted.

According to Wang Jianlin's friends, his biggest regret in life is not having more children. "My wife didn't want to have more when we were young, and now it's too late," he apparently once said...