China produces a wealth of tycoons

China is producing two new billionaires a week as the world’s super rich outpace the Gilded Age of John D. Rockefeller, a report finds.

Reputedly the world’s first billionaire, US oil magnate John D. Rockefeller, shown in 1930. Picture: AP

China is producing two new billionaires a week as entrepreneurs take advantage of the country’s economic liberalisation, a report from the Swiss bank UBS and the accountancy firm PwC finds.

In 2006 there were just 16 billionaires in what is now the world’s second-largest economy — but that figure has grown to 373, making up nearly a fifth of the global total.

“China is currently the leading country for entrepreneurs to create wealth,” said Dr Marcel Widrig, partner and private-wealth leader at PwC. “Nowhere else has the same combination of a huge population, technology innovation and government support.”

Almost all Chinese billionaires are self-made, with just 3 per cent inheriting their fortune. However, the new fortunes come with a high level of risk; although 106 Chinese people crossed the nine-zero mark last year, 51 dropped off the list again.

Josef Stadler, head of ultra-high net worth at UBS Global Wealth Management, said: “What we have seen in the past is that Silicon Valley invents, Asia copies. What we see today is a world movement where China stops copying, and China develops and disrupts on its own and re-exports to the rest of the world.”

Chinese businesses were “leapfrogging” other industry leaders, he said, adding: “They can do that because of massive scalability, and a mass market that is three to four times as big as the United States.”

The total worth of Chinese billionaires is now $US1.12 trillion ($1.6bn).

Half of the wealth enjoyed by China’s billionaires comes from three sectors: real estate, technology and consumer and retail.

Experts said this reflected the country’s rapid development after the government began loosening economic restrictions and allowing private enterprise.

Early entrepreneurs made real-estate fortunes as the population moved from the country to the city. A burgeoning middle class combined with the growth of communication technology has now fuelled a boom in technology and e-commerce.

But while the number of people living in poverty in China has dropped significantly in recent years, at the end of 2016 43 million people still lived below the government’s official poverty line of 2300 yuan income per year — $468.

The world’s richest people made a record amount of money last year, with the wealth of British billionaires growing by a quarter, the report has found.

The fortunes of billionaires rose by £1.3 trillion ($2.4 trillion) worldwide, almost 20 per cent, from booming stock markets and a huge increase in the number of Chinese super rich.

The figures, from UBS and PwC, will also increase concerns about the global wealth divide.

Some of Britain’s wealthiest people were among the biggest winners, with its 54 billionaires enjoying an average jump from £2.3bn to £2.9bn.

They were led by Sir James Ratcliffe, the Brexit-backing owner of the chemical manufacturer Ineos, with an estimated £21bn. He is the richest man in the country, although he is set to leave for Monaco.

Globally 2158 billionaires held assets worth an average of £3.2bn last year, up from pounds £2.9bn in 2016.

The report found that the fortunes of the super rich now outpaced the Gilded Age at the turn of the 20th century, when John D. Rockefeller became the world’s first billionaire.

“The past 30 years have seen far greater wealth creation than the Gilded Age,” the report said.

More than 300 billionaires were created last year but 153 slipped out of the wealthiest bracket.

Female billionaires remain in a small minority, comprising 11 per cent of the total. They include the youngest billionaires, the Norwegian sisters Katharina, 23, and Alexandra Andresen, 22, who inherited large stakes in their father’s industry, finance and property conglomerate.

Anthony Shorrocks, an economist and author of a global wealth report produced by the bank Credit Suisse, said that the rate of billionaire wealth growth had never been higher.

He said that it was much easier to make fortunes these days than it ever was in the past. “It’s quite clear lately that certainly a lot of the younger self-made billionaires are in industries that involved very little fixed costs, they’re to do with the internet or financial services,” he said.

He compared Mark Zuckerberg, the founder of Facebook, with the industrialist Henry Ford.

“For Ford to increase his wealth he had to build factories, he had to move into different countries, he had to set up a service network, all these things take a lot of time and money. If you’re Facebook it takes almost no time and zero cost to set up in another country. Almost every extra pound is profit,” he said.

Daniel Pryor, of the Adam Smith Institute, a free-market think tank, argued that economic growth was driving rising living standards and lifting people out of poverty. He said that the “new super-rich are younger entrepreneurs in the USA and China — innovators creating huge value for consumers”.

The increase in wealth at the top end is creating a breed of multigenerational families akin to the Rockefellers and Rothschilds of the late 19th century, the report’s authors suggest. The 30 wealthiest individuals over the age of 70 have accumulated $US70bn ($99bn) between them.

“The calculation is simple,” the report said. “There are 701 billionaires over the age of 70, whose wealth will transition to heirs and philanthropy over the next 20 years, given the average life expectancy.”

Among billionaires who inherit a business, almost two thirds become entrepreneurs themselves. Josef Stadler, head of ultra-high net worth at UBS Global Wealth Management, said it was a misconception that children who inherited often squandered a fortune, adding: “It’s the opposite. They would feel ashamed not to be entrepreneurs themselves and show their parents that they’re even better.”

The billionaires’ wealth has renewed concerns about inequality. Carlotta Balestra, a policy analyst at the Organisation for Economic Co-operation and Development (OECD), said that wealth inequality had been increasing in Britain and the US since the 2008 global financial crisis.

This had been caused by “falling house prices in the aftermath of the recession and lower rates of home ownership [as well as] higher values for financial assets in the recovery benefiting those at the top”.

By one measure tracked by the OECD, wealth inequality has increased by a third in Britain since 2007.

Ana Caistor Arendar, Oxfam’s head of inequality, said the report showed that “there has never before been so much wealth concentrated in the pockets of so few”.

“This is a symptom of an economic system that is failing those at the bottom of the pile, who face a daily struggle to survive on meagre incomes,” she said, calling on governments to make sure that “everyone receives a fair share of economic growth”.

The Times