Chinese Billionaires Lost A Third Of Their Wealth In The Past Year

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Chinese billionaires lost almost a third of their combined wealth in the past year as Asia’s mega rich experienced the biggest drop in their total net worth compared to anywhere else in the world, a new study shows.The group saw their fortunes shrink by a whopping $160 billion from August 1, 2011 to July 31st this year, according to an annual study by wealth intelligence firm Wealth-X released Monday, largely due to the poor performance of its equity market with the benchmark Shanghai Composite Index falling 20 per cent in that period.

“A key driver in their wealth diminishing was, in general, equities, which were down… so too were the valuations—and that makes a substantial part of their net worth,” Mykolas Rambus, CEO of Wealth-X told CNBC on Monday.

In total, the population of China’s ultra-high net worth (UHNW), which are individuals with assets worth $30 million and above, shrank by 2.3 per cent in the past year, while their combined wealth decreased nearly 7 per cent to $1.6 trillion. That compares to a 3.3 per cent gain in the combined wealth of such individuals in the U.S., which saw their net worth hit almost $8.3 trillion this year.

Rambus says individuals holding assets in real estate and manufacturing in China’s coastal provinces were the hardest hit as factory production moved inland.

“If you pick a region like Guangdong, there’re still a number of individuals who held substantial assets—factories, properties, raw goods, you name it—who are all staring at diminished demand; empty factories in some cases,” he said.

On the whole, the wealth of the UHNW individuals across Asia fell by nearly 7 per cent to $6.3 trillion in the past year, led mainly by declines in the continent’s three biggest economies China, Japan and India, which account for about 75 per cent of its ultra-rich population.

India’s mega-rich population saw the largest decline—not just in the region but in the world—with 485 people leaving the ranks of the UHNW.

“The Indian equity markets, which have significant impact on the local UHNW population, declined by 8 per cent during the measuring period while the Indian rupee declined by 25 per cent,” the report said.

Rambus, however, notes that the findings do not indicate that there are an increased number of UHNW individuals who have gone bankrupt, rather, “it’s just that their prospects aren’t exiting and the value of their assets has diminished as a result of what’s happening the markets.”

Meanwhile, Japan, which is home to the highest number of super-wealthy people in Asia at 12,830, saw the largest decline in their combined wealth globally with a decrease of $195 billion in the past year.

The key reasons behind the decline were a slumping equity market, which fell 16 per cent during the period, and weak property and manufacturing sectors, which compounded the fallout from Japan’s 2011 earthquake and tsunami, the report said.

“It’s a one after another shock for Japan and frankly, this is to a degree somewhat of the policies in the last many years coming to roost, being accelerated by the events that happened in Japan in the last two years,” Rambus said. “So you have a number of individuals who are taking money out of Japan, looking for new investment opportunities offshore.”

While latest figures point to a slowdown in wealth growth in Asia, Rambus remains optimistic on the region, which he says is experiencing a “temporary dip.”

“The long term trajectory is still the same, there’s still lots of wealth being created in Asia,” Rambus said. “There’s no question about it, it’s just distribution and temporary lull in the markets.”

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