Vanishing Riches: How Thousands of Chinese Millionaires Are Disappearing | Digging into China

Hi, I'm Dong Sean. Welcome to Digging into China, where we explore China in depths to review unique perspectives. Today, we are diving into the world of China's wealthy. Intuitively, one might assume that since the Chinese real estate bubble began to deflate and the economy entered a recession, the wealth of Chinese individuals has been declining. However, when we examine the financial reports of major banks, the number of private banking clients and their asset sizes appear largely unaffected. For instance, China Merchants Bank, the leader in domestic private banking, reported over 10% growth in their private banking clients last year. These are individuals with the means to deposit over 6 million yan in the bank. true high netw worth individuals yet their numbers continue to rise significantly. This seems at odd with the broad economic challenges we observe in China. Is this true truly the case? In today's pre program, we'll explore a wealth statistics report on Chinese affluent families from the Huran research institute to determine whether China's wealthy can remain secure during an economic downturn. Let's start with some data to understand the scale of wealth in China. By the end of 2024, how many households had a total assets exceeding 6 million? The answer is 5,128,000 households. This includes both movable and immovable assets, meaning that owning a decent property in a first tier city often qualifies a family for this group. However, this figure has declined for two consecutive years. The peak was in 2022 with the 5,183,000 households. Over two years, approximately 55,000 households saw their assets fall below the 6 million yen threshold. What happens when we raise the wealth bar? For households with assets over 10 million yen, the picture is a similar. Their numbers are shrinking as are those of households with 100 million yen or even ultra weealthy families with over $30 million US. The peak for all these groups was in 2022, closely mirroring the trajectory of China's real estate market. Households with assets above 10 million UN number 2,66,000 representing 0.42% of all Chinese households. In other words, only four out of every thousand households have assets exceeding 10 million. This reflects total assets, not net assets. So liabilities are not subtracted. In 2023, households with over 10 million UN in assets decreased by 27,300 followed by another drop of 17,000 in 2024. Why are these affluent households vanishing from the data? Two primary factors uh explain this. First, migration is on the rise with a survey indicating that over 10,000 high netw worth individuals have left China annually in recent years. Second, asset values are shrinking, driven by falling property prices or investment losses. I believe the dominant factor is declining real estate values as Chinese wealthy families have a critical vulnerability. Property constitutes 50% to 70% of their assets. For a family with 10 million yen in assets, 7 million might be tied up in real estate, leaving only 3 million in other assets. If property values drop by half, their wealth could shrink by three and a half million yen, pushing them out of the affluent category. This is the major drawback of real estate as an illquid asset. Many affluent Chinese families may appear to have tens of millions in assets, but their available cash is often limited. When financial needs arise, they may need to mortgage their properties. Thus, even families with tens of millions in assets can face financial concerns. As wealth diminishes, so too does competence. According to Huran's survey, in 2021, many high netw worth families described their financial situation as very or very comfortable. By 2025, that sentiment had dropped by 30 percentage points. More intriguingly, when asked about their top priorities, their response shift. Health remained the top concern with an even higher percentage than before. Happiness held steadily in second place. Surprisingly, money rose to third. In 2021, only 15% of respondents prioritized money, ranking at the 10th. By 2025, that figure doubled to 30%, propelling it onto the top three. This shift reveals a deeper truth. Previously, China's wealthy were optimistic, believing their wealth was sufficient. So, they pursued the time, freedom, and self-fululfillment. Now, they are growing anxious that their wealth may not suffice, fostering pessimism about the future. The core issue is their heavy reliance on real estate which has become a trapped asset. In an economic downturn, cash flow is paramount. If even the wealthy are pessimistic, this bolds poorly for consumption. Huran's survey indicates a clear shift in high net worth spending patterns. Status driven consumption is declining while practical spending is rising. Even the affluent are tightening their belts much like everyone else. Specifically, luxury experiences such as extravagant travel, fine dining, or status driven purchases are decreasing. Business related socializing like a spending on maintaining networks or appearances is also down. Conversely, spending on family priorities such as children's education or parental healthcare is increasing. Investments and the daily expenses are slightly up reflecting a more cautious approach. In luxury consumption, technology products have emerged as the top category with over 60% of high netw worth families increasing spending here making it the leading luxury purchase. Clothing, shoes, jewelry, cosmetics and perfumes follow. Meanwhile, traditional luxury items like watches, fine wines, a yacht, and private jets are seeing reduced spending. For instance, 38% of families cut back on watches while 44% reduced spending on private jets and yacht. Clearly, the consumption desires of China's wealthy are waning, which explains the wave of luxury stores closures in China. Hurin's survey further classified China's high netw worth individuals into six distinct groups each reflecting their psychological and behavioral responses to the current economic climate. The first group the accumulators proactively scale back reducing high risk investments stockpiling cash lowering leverage and re relocating funds from illquid assets. Their mindset resembles hibernation, not defeist, but preparing to weather the storm in anticipation of better times. With a strong financial acumen and risk management, they are strategic defenders comprising 30 uh 30.4% of the wealthy, the largest group. The second group, the pauses, are forced into defensive stance. Struggling businesses, investment losses, or declining property values have strained their cash flow, leaving them no choice but to cut back reluctantly, prioritizing basic needs. If economic conditions worsen, these families risk sliding down the social ladder. They represent the 25% of the wealthy, the second largest group. The third group, the fearless, is intriguing. Neither aggressive nor anxious. They rejected the rate. They rejected the rat race and embrace small joys, spending on personal interests like travel, art, or cultural pursuit. Despite shrinking wealth, they prioritize emotional fulfillment as a form of defense, focusing on the present rather than wealth expansion. They account for 17.4%. The fourth group, the trailblazers, are the most ambitious. Undeterred by the economic climate, they double down, maintaining social investments and expanding business networks to climb higher, often younger or in emerging sectors like technology. They aim for upward mobility. China's new tech tycoons often fall into this category, which comprises 11.9%. The fifth group, the authentics, prioritize selfexpression, spending on fashion, personalized services or hobbies. Even in tough times, their consumption remains steady, driven by a strong sense of identity. For them, wealth is a tool for self-expression, not just a numbers. They make up 8.8%. Lastly, the sliders are the most vulnerable. Once successful, they now face significant wealth erosion due to failed investments, business struggles, or plummeting property values. Their spending power is declining and they risk falling out of the high net worth bracket entirely. This group under immense psychological pressure represents 6.6%. Collectively, these six groups show that the most wealthy individuals are in defensive mode with only a few pushing up uh pushing forward. This reflects a broader consensus in China. Preserving wealth is now more critical than pursuing growth. Huran's data reveals that even among China's richest, the risk of downward mobility is alarmingly high. the uh the sliders and the pauses together account for 32%. Meaning one in three of China's wealthies could return to ordinary status. If this is the reality for the wealthy with what about the middle class families with assets below 1 million, their risk of financial decline is likely higher than the 30% seen among affluent. Hence survey offers a sobering view of China's wealthy class closely aligned with the reality. By contrast, the US faces inflations the opposite of China's challenges. With an overheated economy, American asset values are rising rapidly and the wealthy are driving robust high-end consumptions. Last year, the US high net worth population grew by 7.3%. Unlike China's real estate focused wealthy, American affluent families invest heavily in liquid financial assets. With a strong stock market performance, they've reduced cash reserves, increased investments, and adopted a more optimistic outlook. To conclude, Huran's survey paints a vivid picture. China's wealth peaked in 2022 alongside the real estate market. Over the past two decades, China's affluent build their fortune on property and traditional industries. As the housing market declines and the private sector profits shrink, even families with tens of millions in assets face wealth erosion and cash flow concerns. More troubling, the mindset of China's richest is shifting toward worry about insufficient wealth. If even China's wealthiest are pessimistic, the broad implications for societal consumption and investment confidence are clear. A significant reshuffleling of China's affluent families looms. The old tycoons of real estate and traditional industries will likely fall behind, either immigrating with their remaining wealth or facing bankruptcy in China. Meanwhile, technology will create a new wave of tycoons. Though this wealth effect pales in comparison to the early days of China's reforms, back then a small hometown factory could make you a billionaire. Today, only exceptional figures like Leang Wong Fong of Deep Seek can rise as tech tycoons. Yet, most of us are ordinary. In such a challenging economic environment, the prevailing sentiment is pessimism, resignation, and a caution. With such a subdued atmosphere, can a nation truly expect another era of economic prosperity? Thank you so much for watching. If you find this video helpful, please like it, drop a comment below, and hit the subscribe button right here. It really helps YouTube suggest my video to others. I'll be back with more content soon. Until then, be