Get rich quick

Such has been the growth in China's elite during the past decade that its super-rich are now multiplying at a much faster rate than those in the West, reports Peta Tomlinson. And they are getting younger too

During his years with Arthur Andersen in Shanghai, chartered accountant Rupert Hoogewerf began studying the fortunes of China's leading business people. This became the China Rich List, and when it was first published in luxury publication the Hurun Report in 1999, he struggled to find 50 names with a net worth of US$6m.

Now, in only its ninth year, the list identifies some 800 Chinese millionaires and a staggering 106 billionaires. Even though Forbes found only 66 Chinese billionaires for its latest published rich list, 2007 was after all a time when anything was possible - the 'get rich quick' year when boiling stock markets created new millionaires at breakneck speed.

Heading China's monetary elite is Yang Huivan, just 26 years old, whose personal fortune catapulted to US$17.5bn on the back of shares in her father's property development company. She became the first of two Chinese to break through the US$10bn mark, and the richest woman in Asia.

In second place is paper recycler Zhang Yin, 50, last year's number one, whose wealth tripled to US$10bn in 2007 as her company's share prices soared. This makes Zhang the richest self-made woman in China.

The list has expanded from 500 in 2006 to 800 in 2007, with the average wealth doubling and the average wealth of the top 100 tripling. They are also doing it younger. The average age of the individuals listed is just 47 - considerably lower than the 62 years Forbes had for its billionaires list in 2007.

The reason, says Hoogewerf, is that China's wealthy are self-made. In most cases, they started with nothing but a burning desire to succeed. 'They're hungry,' he says. 'They were poor and they wanted to change their lives. December 2008 will mark the 30th anniversary of the open door policy, which gave them the opportunity. It opened the door to Chinese entrepreneurship.'

Zhang Yin is a case in point. Zhang founded Nine Dragons Paper in 1985 after losing her job as an accountant in Hong Kong, starting the business with her life savings of 30,000 yuan (€2,895). But Zhang came from a poor family and was used to hard work. She later said that a lack of material things had taught her to appreciate the value of possessions. Zhang also attributes her drive to her parents, who 'always encouraged their children to face life head on and solve their problems independently'.

Interestingly, women are leading the wealth charge in China. Six of the top 10 richest self-made women in the world are Chinese, led by Zhang Yin and Zhang Xin (no relation), a Beijing real-estate developer. Hers, too, is a story of triumph over adversity. As a teenager living in a Hong Kong slum and toiling in a clothing factory, Zhang Xin dreamed of getting an office job, learning English and studying overseas. She achieved her dream, obtaining a master's degree in development economics at Cambridge and working in New York as a Wall Street analyst before returning to China to start her own company.

Spend, spend, spend...

With all this new found wealth, it is not surprising that the Chinese are looking to spend it. China is well on the way to being the world's largest consumer of luxury goods, with Goldman Sachs predicting that it will claim top spot by 2015 with a 29% global share. In a 2005 report, China: The New Lap of Luxury, Ernst & Young noted that the new generation of Chinese professionals had 'no concern for price' and would 'freely spend an entire month's salary on a single purchase'. In a later report (August 2007), Ernst & Young said that social and economic changes in China had seen the greatest spending power shift to women.

In The Rise of Female Consumerism in China, Ernst & Young found more Chinese working women are living a consumption lifestyle, choosing to spend today and putting off savings for the future. 'It is imperative for companies to thoroughly understand this segment as Chinese female consumers, who have faced many dramatic economic and social changes in the past decades, continue to consume and spend,' it says.

A survey by KPMG, Australia's Monash University and market research firm TNS also found that young Chinese women are beginning to supplant businessmen aged over 35 as the main Chinese buyers of luxury goods. 'Until recently, 90% of all luxury spending in China was dictated by men. The modern female luxury shopper includes the businesswoman, the celebrity and the newly independent rich wife,' the survey found.

The potential for Chinese consumerism was recognised by the world's luxury brands years ago. All have an established presence in the major cities such as Beijing and Shanghai, and are now expanding to second-tier cities. The investment seems to have served them well. According to Radha Chadha and Paul Husband, who wrote The Cult of the Luxury Brand: Inside Asia's Love Affair with Luxury, French brand LV has been profitable since its first year in China, with annual growth of almost 50%. Italy's Gucci, which has 16 stores on the Mainland, reported sales growth of more than 65% last year.

The Chinese consumers' 'love of bling and shine', as Ernst & Young puts it, has seen all manner of lifestyle extravagances elbow for exhibition space in the hip city of Shanghai. These luxury shows all come with enticing names, such as the Shanghai International Spectacular Brands Expo, featuring 100 extravagant exhibits from brands including Emporio Armani and trendy vehicle maker Hummer. Millionaire Fair, one of the world's leading luxury fairs, had on display last year a villa for 250m yuan, a crystal ball for 25m yuan, private islands and a 30-carat diamond. The highlight was touted to be the world's most expensive phone, each button studded with a diamond, on sale for 14m yuan.

But nothing spells success like a flash car and, in the heart of Shanghai, a newly opened Porsche showroom squares off against the displays of Ferrari and Mercedes-Benz. Porsche, with 18 dealers in China, expected to double its sales figures in 2007, while Ferrari banked on a 33% growth. Bentley and Rolls-Royce are expanding in both their sales figures and presence. Newcomers Aston Martin, Lamborghini and Spyker are dipping their toes at auto shows.

In addition to buying toys, China's rich are also in the market for financial services. Quick to cash in on the opportunities was Citigroup, which specifically targeted entrepreneurs when it opened its first Mainland private bank in March 2006.

At the opening Todd Thomson, chairman and chief executive officer of Citigroup Global Wealth Management, cited China's entrepreneurial culture, high savings rate and fast-paced modernisation of its banking sector. 'In 10 years, probably less, we may be witnessing Asia's single largest market in terms of investable assets among the high net worth population,' he said.

Deutsche Bank, which launched its private wealth management business in Shanghai in November 2006, said the city was 'the next natural path for expansion'. 'China's growth is generating significant affluence, and the need for wealth management services is rapidly expanding,' said Pierre de Weck, global head of private wealth. 'Clients are seeking more sophisticated solutions in managing their wealth and we see huge growth potential in China as the process of market deregulation continues.'

Standard Chartered describes China as one of the group's key markets, and broke its own expansion speed records by opening five sub-branches in a month last July. HSBC is continuing its expansion in the Mainland, including last year's launch of its Premier wealth management services, targeting high net worth individuals.

Cesar Bacani, partner at Hong Kong-based The Editors Group and author of The China Investor: Getting Rich with the Next Superpower, believes these nouveau riche want to diversify their wealth outside of China, particularly with a view to investing in property, stocks and other assets in Hong Kong, Singapore, Europe and the US. 'A wealth manager who can do this for them will have a lot of business,' he says.

Peta Tomlinson is a freelance journalist who writes for the South China Morning Post and the Hong Kong Trade Development Council.