When the world gets closer.

We help you see farther.

Sign up to our expressly international daily newsletter.

Enjoy unlimited access to quality journalism.

Limited time offer

Get your 30-day free trial!
China 2.0

The Difference Between Chinese And Western Billionaires

A disproportionately high number of China's so-called "super-rich" came from real estate. It's the first clue about what's wrong with Chinese wealth accumulation.

RMB banknotes at Beijing's Bank of China
RMB banknotes at Beijing's Bank of China
Guo Yumei*

BEIJING — Technological and scientific innovation not only pushes forward economic development, but it also makes a few business leaders some big and fast money. Microsoft's creative contribution in operating systems both promoted the rapid development of computers, and just as rapidly made Bill Gates very, very wealthy. He has remained, for most years over the past two decades, at the top of the Forbes list of the world's richest men.

More recently, not only has Tesla's powerful acceleration promoted the development of the environmentally conscious electric car, but it has also propelled Elon Musk to be one of the fastest accumulators of wealth on the Hurun Rich List.

Meanwhile, in China, the number of people with a net worth of at least two billion RMB ($305 million) has increased from ten in 2000 to as many as 1737 in 2015. Their combined wealth accounts for 9.2% of China's total personal wealth.

It may seem like a similar story, but a closer look shows that the composition of China's super rich is quite different from their peers in the West.

Most China's wealthiest people come from the real estate sector

Thanks to the urbanization and industrialization of the past dozen years, the Chinese real estate industry has ushered in its golden age. Not only has real estate become the industry that was feeding China's rapid growth, it has also created a huge batch of property developer tycoons. Out of the Chinese people who made it onto last year's Hurun Rich List, 107 of them come from the real estate sector. They make up 30% of China's richest people on this global ranking whereas the richest people from the same business account for only about 5% in the U.S., Germany or Japan. And in a similarly developing country, India, only 4% of its richest men come from the property sector.

Real estate is not a technological and scientific innovation-oriented industry. At most, four aspects of real estate, development operation, planning and design, marketing strategy and property management, involve innovation. But even these are more about creative models and improvements of features than real technological and scientific innovation.

Factory power

Benefiting from the favorable conditions of a demographic dividend, globalization, and access to the World Trade Organization (WTO), China's manufacturing industry has rapidly expanded since its reform and opening-up. Since 2010, China has overtaken the U.S. as the top global manufacturing superpower. This also created its own large share of billionaires.

Out of the Chinese people who make it onto the Hurun Rich List 2015, 61 of them come from the manufacturing sector. They make up 17% of China's richest people, just after those from the real estate industry. In comparison, only 10% of the rest of the world's billionaires on the list are from this sector.

And yet, China's manufacturing industry mostly remains in low-value-added processing and assembly. It is still inadequately self-sufficient in high-value-added core technology innovation. In other words, China is still far in transforming "Made in China" into "Created in China".

China's manufacturing industry invests relatively little in Research and Development, just 2.2%, compared to 10.8%, 9.8%, 8.2% and 7.7% respectively in Japan, U.S., South Korea and Germany.

The steel industry and the household appliance industry are typical examples of China's insufficiency in manufacturing innovation. Though the Chinese steel industry has long faced a serious problem of overcapacity, most of the country's high-end steel demand for cold-rolled and electrical sheet steel is supplied by imports.

Again, though China has nurtured household electric goods giants Haier and Gree, they lag behind advanced countries in core and cutting-edge technology and have to use foreign production lines. This is clearly shown from the fact that, as China's white goods leader, Haier has fewer than 5,000 patents, a figure dwarfed by the 48,000 of Samsung and more than 30,000 each for Panasonic and Sony.

No 2.0

TMT, which stands for technology, media and telecommunication, also encompasses the Internet and the emerging media-based industry linking high-tech with telecommunications. Big names in this sector include Microsoft, Google, Apple, Facebook, Epson and Samsung, and it is where a growing number of billionaires of innovation-oriented countries come from. In America, Japan and Germany the proportion of billionaires propelled by the TMT industry account for 23%, 38% and 18% respectively. In comparison, China has only 10% of its billionaires from the TMT sector which doesn't even make it into the top three industries occupied by China's wealthiest people.

In addition, numerous Chinese TMT industry leaders, such as Baidu, Alibaba, Tencent, and Xiaomi, still have a long way to go to improve their scientific and technological innovation capacity. Their quick rise has been largely due to the rapid spread of the Internet and China's mass demographic dividend, instead of from owning leading technologies like their American peers. Here, we can return to the patent scales: Xiaomi owns a total of 352 international patents, while Apple owns 24,000.

*Guo Yumei is a professor at Renmin University's School of Economics.

You've reached your limit of free articles.

To read the full story, start your free trial today.

Get unlimited access. Cancel anytime.

Exclusive coverage from the world's top sources, in English for the first time.

Insights from the widest range of perspectives, languages and countries.

Ideas

How U.S. Airlines Are Doing Cuba's Dirty Work On American Soil

American and Southwest Airlines have been refusing to allow Cubans on board flights if they've been blacklisted by the government in Havana.

How U.S. Airlines Are Doing Cuba's Dirty Work On American Soil

Boarding a plane in Camaguey, Cuba

Santiago Villa

On Sunday, American Airlines refused to let Cuban writer Carlos Manuel Álvarez board a Miami flight bound for Havana. It was at least the third time this year that a U.S. airline refused to let Cubans on board to return to their homeland after Havana circulated a government "blacklist" of critics of the regime. Clearly undemocratic and possibly illegal under U.S. law, the airlines want to make sure to cash in on a lucrative travel route, writes Colombian journalist Santiago Villa:

-OpEd-

Imagine for a moment that you left your home country years ago because you couldn't properly pursue your chosen career there. It wasn't easy, of course: Your profession is not just singularly demanding, but even at the top of the game you might not be assured a stable or sufficient income, and you've had to take on second jobs, working in bars and restaurants.

This chosen vocation is that of a writer or journalist, or perhaps an artist, which has kept you tied to your homeland, often the subject of your work, even if you don't live there anymore.

Since leaving, you've been back home several times, though not so much for work. Because if you did, you would be followed in cars and receive phone calls to let you know you are being watched.

Keep reading...Show less

You've reached your limit of free articles.

To read the full story, start your free trial today.

Get unlimited access. Cancel anytime.

Exclusive coverage from the world's top sources, in English for the first time.

Insights from the widest range of perspectives, languages and countries.

The latest