The Chinese that “got rich first”
The survey data suggest that about 50% of China’s wealth is in the hands of the 113m or so people with a net worth of 1m-10m yuan. This cohort—just 8% of the population—has even more influence over financial markets than their wealth would suggest. They own 64% of all publicly traded shares, for instance, and 61% of investment funds.
The group are the main beneficiaries of China’s 40-odd years of booming growth. Born in the 1960s, 1970s and early 1980s, they were some of the first to return to university after schools were closed during the Cultural Revolution. They were the first group to start small, private businesses. When the Shanghai stock exchange opened in 1990, they were among the first retail investors on the scene. They also propelled China’s property market since the first mortgage was issued by a state bank in 1986. Many will have cashed in on the privatisation of housing in the 1990s, buying flats for meagre sums that are now worth a fortune. They have experienced a miraculous shift in living standards over their working lives, from communal kitchens to holiday homes. Deng Xiaoping declared in the late 1970s that China would reject Maoism and “let some people get rich first”, and these are the people who did.
Now, as their income declines and their assets atrophy, the got-rich-first are becoming more cautious about spending. This “negative wealth effect” is hurting the economy. Oxford Economics, a research firm, estimates that household savings jumped to 32.4% of disposable income in the last quarter of 2023. Excess savings that could be used to consume or invest probably hit around 4trn yuan, or 3.2% of gdp.
As they become more cautious, the got-rich-first are reshaping China’s markets.
Source: The Economist