January 29, 2014

8 Trends for China’s Ultra-Rich in Year of the Horse

Wealth-X outlines predictions for this important demographic group for the 12 months ahead in the lunar calendar

A float for Year of the Horse festivities being prepared in Beijing. (Photo: AP) A float for Year of the Horse festivities being prepared in Beijing. (Photo: AP)

This Friday marks the first day of the Year of the Horse in the Chinese lunar calendar.

Information analyzed by Wealth-X, a research firm, shows that those born in the Horse Year are the most highly educated among ultrahigh-net-worth individuals. Those in this group, who have about $30 million or more in assets, also donate more to educational causes than any other zodiac sign.

Plus, the Year of the Horse has the highest percentage of self-made UHNW individuals, of all the 12 Chinese zodiac signs.

For instance, self-made millionaire Wenliang Wang, founder of China Rilin Construction Group, was born in 1954 and is estimated to be worth $620 million. Wang is involved in several philanthropic projects at New York University and the National University of Singapore.

After a challenging Year of the Snake, the consulting and research group Wealth-X shares its eight predictions for China’s ultrahigh-net-worth investors over the next 12 months:

Chinese investors laughing in front of stock board. (Photo: AP)

1. Jump in $500 Million Group

The population of Chinese UHNW individuals with net worth above $500 million will grow by almost 6% to 535 individuals, while the growth of the overall Chinese UHNW population is expected to stagnate. In 2013, the UHNW population in China included 10,675 individuals—down from 11,245 people in 2012, a drop of 5%.

2. Growth in UHNW Wealth

Chinese UHNW individuals with net worth in excess of $500 million will experience 4% growth in wealth to $630 billion. Total Chinese UHNW wealth is expected to increase by 2% in 2014 to $1.545 trillion. This figure declined by 4% in 2013 to $1.515 trillion, as economic growth weakened from expected levels, export growth declined and the stock market fell accordingly.

3. Growing UHNW Liquidity

The liquidity of the average Chinese UHNW individual will increase from 12% to nearly 14% of net worth, as some people move between wealth tiers and chose to hedge against potential economic difficulties. Still, Chinese UHNW individuals’ liquidity remains low vs. average liquidity of UHNW individuals worldwide, with 25% of their net worth in liquid assets.

4. China’s UHNW to Top Japan’s

Despite some weakness 2013, China's total UHNW population and wealth are expected to top Japan's by 2026, the next Year of the Horse. Research estimates that in 12 years, China’s UHNW demographic group could be worth some $4.2 trillion vs. $3.3 trillion for its Japanese counterpart.

Ferraris at an auto show in China. (Photo: AP)

5. More Shopping Overseas

In 2014, 18% more of Chinese UHNW individuals' luxury spending will be done outside Greater China (i.e. China, Taiwan and Hong Kong), primarily in American and European markets, than in 2013. Overall, the Chinese are already the world's biggest shoppers abroad, and research indicates that the number of Chinese outbound tourists could double to 200 million people by 2020, when their projected spending should triple. 

6. Expanding Corporate Culture

The proportion of Chinese UHNW individuals deriving their wealth from industrial conglomerates will increase from 5.5% in 2013 to 6.5% in 2014. This should take place through a growing diversification in corporate holdings on the part of UHNW investors.

7. Time to Travel

Those born in the Year of the Horse tend to be avid travelers. As Chinese UHNW individuals are likely increase the frequency of their business and leisure travel in 2014, Wealth-X expects to see China’s private jet market for UHNW individuals expand by 30%.

8. More UHNW to Live Overseas

Currently, only 1,050 of China’s roughly 10,700 UHNW individuals reside outside Greater China. This population should grow by 8% this year to 1,135, as uncertainty over government policies, risky real-estate markets, problematic debt issues for many Chinese banks and environmental pressures trigger the decision by some Chinese-born entrepreneurs and business leaders to move from China to other locations.

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Check out World’s Top 10 Cities of the Super Rich: 2013 on ThinkAdvisor.

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