It is perhaps unusual to find a 26-year-old at the summit of China’s rich list, but the origins of Yang Huiyan’s fortune – which the Hurun Report listed as US$17.5 billion in 2007 – are fairly typical. Yang received a 59.5% stake in Country Garden, her family’s Guangdong-based real estate business, from her father, Yang Guoqiang. When the company went public in April 2007, the value of Yang junior’s holding rocketed.
“The biggest source of private wealth in China is real estate,” said Rupert Hoogewerf, founder and publisher of the Hurun Report. “Over the last 10 years, what we have seen is the world’s largest privatization project.”
The 800 members of the 2007 Hurun rich list had a combined net worth of US$457 billion. The average wealth level was US$562 million, twice the figure from a year ago. This was due in no small part to the strength of the property and stock markets, both of which have since waned. The list featured 106 US dollar billionaires.
The average profile is a 47-year-old man from east China with interests in property or manufacturing, who started his business in 1993. Although the makeup of this elite group is changing – members come from a wider variety of industrial and geographical areas – they are all essentially entrepreneurs.
Self-made millionaires approach wealth management in a different way than those who inherit fortunes. “Compared to wealthy people outside of China, these entrepreneurs are willing to accept a high level of risk – of course the biggest risk they took was when they started their own companies,” said Richard Leung, head of wealth management at UBS Securities, the Swiss bank’s securities joint venture in China.
“They also tend to be more hands-on when it comes to managing their own wealth.”
According to Anuj Khanna, Credit Suisse’s managing director and head of private banking for North Asia, China’s high net worth individuals favor a combination of real estate, equities and investment vehicles that offer liquidity, security and low volatility. Although they are looking more at risk-diversifying strategies that allocate investments in a broad range of products and currencies, the emphasis is on wealth creation rather than wealth protection.
“They also desire higher returns within a shorter timeframe,” added Hou Wey-fook, head of Asia private banking at ING.
Leung said he expects attitudes to change as this first generation of wealthy individuals considers how to pass fortunes on to the younger members of their families.
“By that time, tax planning and estate planning will become very important,” he said. “There is no estate tax in China today, but this may change.”