For all the talk of China’s economic slowdown in 2012, its wealthy did not do so badly. Last year, 11,245 Chinese “ultra-high-net-worth individuals,” those with $30 million or more each in assets, were worth a net total of $1.6 trillion, according to a recent report by Singapore-based research firm Wealth-X. That’s slightly more than the combined GDP of South Korea and Taiwan, whose economies generated $1.1 trillion and $482 billion respectively. The firm predicts that China’s mega-wealthy will be worth 1.7 trillion in 2013.
Back when those two countries were the “Asian Tigers,” in the 1990s, they too spawned a new generation of the wealthy. What’s unique about China’s super-rich is that most of their fortune come from stakes in some of China’s 145,000 state-owned enterprises (SOEs), which dominate the economy. (These include Fortune 500 companies like petroleum firm Sinopec, the bank ICBC, and China National Petroleum.) Wealth-X predicts that the ultra-wealthy population will grow by another 1,000 people in 2013 as a result of SOE activity. “Partnerships with state-owned enterprises is one of the key factors driving growth,” says David Friedman, president of Wealth-X.
The fortunes of China’s SOEs, and the many wealthy Chinese elites and officials connected to them, could change if incoming Chinese leader Xi Jinping and his team are determined to reform the firms. Foreign and Chinese economists argue that SOEs are stifling the country’s growth as they eat up the bulk of bank lending and crowd out smaller companies. Before the party congress in November where Xi and other cadres were anointed as the next leaders, the party pledged to reform SOEs and open up sectors dominated by the state.
However, Xi has not said anything else on the topic. As we’ve reported, the party’s economic work conference in December was vague and did not mention change to the SOE sector. So the near term is likely to be good for China’s wealthiest. Wealth-X expects sales of private aircraft to double and spending on luxury goods to reach an average of a little over half a million dollars per person—sorry, per ultra-high-net-worth individual.