A report today reveals that a third of China's wealth goes unreported, and that most of that "gray income" ends up with the richest 10 percent. In a country that mixes overt communism with covert capitalism, China's super-rich walk a fine line.
The study by the China Society of Economic Reform (CSER) shows that up to $1.4 trillion ends up in the hands of a growing class of ultra-wealthy Chinese people, Reuters reports. Wang Xiaolu, the economist who headed the study, told the Beijing Evening News that "Gray money is usually closely connected to the following: corruption, abuse of power, public investment, shares in land development [projects] and other monopoly interests." The CSER team offered anonymity and used different survey techniques to get around a reluctance to reveal that wealth.
But, says one American filmmaker who has spent time with China's super-rich for a documentary project, the money is on display in Beijing for those who know where to look. "The lifestyles on display are more ostentatious than most of what you'd see in the West," says Ole Schell. "It's kind of a nouveau-riche style that reminds you of rappers with McMansions. Everything is gold, or has a brand name slapped across it." He has heard of one mogul who built his own opera house and hired performers just to entertain friends, and says that private jets are now more widespread among the entrepreneurial class.
Outside some nightclubs, says Schell, you can see fleets of Lamborghinis and Ferraris, and the occasional $1.7 million Bugatti Veyron—perhaps one of the reasons the Beijing Auto Show has become one of the most important in the world. "They're owned by the so-called princelings," he explains. "Because China has been more free for about 30 years, you have a generation of kids who grew up rich—their parents made money in some shady way in the aftermath of the Cultural Revolution, but these young guys don't know anything but wealth and they'll buy bottles of champagne at night without thinking twice."
High-end property brokers in London report a new influx of money for the city, already awash in Russian and Middle Eastern wealth, from Chinese families looking to invest abroad. Closer to home, Chinese appetite for European luxury means that wines from famous French vintners like Chateau Lafite Rothschild are in such demand that they are even being faked. Last month The New Yorker reported that "some analysts estimate that 70 percent of China's Lafite consumption is counterfeit."
Schell says there is some risk to this new conspicuous consumption: "It's still ostensibly a communist country, even though capitalism is accepted. There's a whole group of 'hidden dragons' who have a lot of money but try to fly under the radar in case the government cracks down, as they do randomly, on a particular individual who is blatantly not following the party line."
Earlier this year, according to USA Today, one of China's richest men, billionaire Huang Guangyu, founder of a chain of electronics stores, was jailed for 14 years for "illegal business dealings, insider trading and corporate bribery." The move was designed, according to China-watchers, to send a "strong warning to China's often-freewheeling business barons."
In recent years, China has also battled that other, almost inevitable, symptom of increased wealth—a growing market for cocaine.
Uncommon Knowledge
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
