A weakening economy, property uncertainties, and changing e-commerce landscape are impacting Chinese wealth creation, according to a study, which revealed that while some benefited, the nation’s economic woes—and the property sector’s downfall, in particular—have dealt a blow to many on the list of rich Chinese.
The Harun China Rich List 2023 released on Tuesday “found 1,241 individuals with more than 5 billion yuan (equivalent to $690 million), down 5 percent or 64 individuals from last year and 15 percent or 224 individuals from the peak two years ago.”
Total wealth dropped 4 percent, to $3.2 trillion, but “898 saw their wealth decrease or remain unchanged, of which 179 dropped off the list.”
The number of wealthy individuals in the Hurun China Rich List also declined two years in a row, for the second time since records began 25 years ago—the previous being in 2018 and 2019.
As real estate developers with high debt continued to lose value, almost 500 individuals dropped off the list in these two years, including Wang Jianlin of the property developer Wanda Group, who was down by $7.3 billion and lost his number-one ranking.
Another former number one, Xu Jiayin of Evergrande, still featured on the list, but that was primarily due to the dividends the company paid in previous years, even though Evergrande went into bankruptcy since then and Mr. Xu has been under detention by the authorities since September.
Several current and former executives of China Evergrande Group and its subsidiaries, according to news reports, have become embroiled in a government investigation into the company’s collapse, as well as a “scandal” in which banks unexpectedly seized 13.4 billion yuan ($2 billion) of the subsidiary’s deposits in late 2021.
The investigation revealed that several Evergrande Property Services Group subsidiaries used the deposits as collateral for loans obtained from banks by third-party firms between March and August 2021, leading Evergrande to lose its deposits and $2 billion in liquidity. Eventually, it was pushed into bankruptcy.
Real estate woes accounted for 15 percent of the wealth lost, while the industrial products slowdown accounted for 14 percent of the decline.
Changing Landscape
Nevertheless, the slowing economy and strict COVID restrictions during 2022 in China helped a few to swell their wealth as more shoppers turned to discount e-commerce platforms like Temu and Pinduoduo.Colin Huang, founder of PDD Holding, for instance, saw his wealth go up by $13.8 billion, which reflects how e-commerce is changing in China, where customer confidence is still low after three years of COVID restrictions, and in other countries, where shopping sites like Temu and Shein thrive.
Temu is an online marketplace owned by PDD Holdings, which also operates Pinduoduo, a major online commerce site in China that offers significantly discounted products generally supplied directly from China to consumers.
Temu, on the other hand, is a platform where China-based merchants sell products and ship them straight to clients without the need for intermediaries in the destination country, hence enhancing affordability for all purchasers.
Pinduoduo’s business model enhances customer benefits by willingly lowering its profit margins on delivery and sellers’ end.
Mr. Huang’s rising fortunes is significant given that in April, the U.S. Trade Representative’s Office (USTR) placed Pinduoduo, which it describes as the third-largest in terms of user numbers, on its blacklist of commercial platforms that failed to prevent the sale of counterfeit products.
“Many of [the site’s] price-conscious shoppers are reportedly aware of the proliferation of counterfeit products on Pinduoduo.com, but are nevertheless attracted to the low-priced goods on the platform,” the USTR wrote in its report.
According to the USTR, the majority of products offered on Pinduoduo are “shanzhai,” a term used to describe imitation products with purposely misspelled names of major brands. Some of the products in its marketplace mimic those of Coca-Cola, Apple, and Samsung Electronics, the USTR alleged.
According to a report by Chinese news portal Sina, however, Pinduoduo argued that its model is akin to the U.S. company Wish.com, and its consumers are poor Chinese farmers.
Chine e-commerce czar Jack Ma, founder of rival Alibaba which is currently going through a restructuring and working to fend off competition from the likes of PDD, fell one place from 2022 to the 10th spot and the number of Alibaba shareholders on the list fell from 18 last year to 12 this year.
Ant, Alibaba, and Jack Ma have been placed under regulatory scrutiny over the past two years. Ant, which operates the renowned Alipay mobile payments program, was forced to cancel a possibly record-breaking IPO in Hong Kong and Shanghai in late 2020. The Chine Communist Party then directed Ant to reorganize its business methods before overhauling the regulatory norms that govern the whole fintech sector.
The USTR also kept Alibaba Group’s Taobao.com, China’s largest e-commerce platform, on the list.
According to Hurun’s list, Richard Liu, the founder of e-commerce giant JD.com, also saw his and his wife Zhang Zetian’s wealth plummet by $6.2 billion since last year, to $8.26 billion.
Property Developers Also Strained
“Real estate was the hardest hit industry for the second year running, as developers with high debt loads continued to see liquidity crunches,” the list said, adding many developers have gone bankrupt too.Indeed, aside from hitting property czars Mr. Xu and Mr. Wang, the tanking real estate markets are impacting rated developers’ wealth as well as their credit quality weakened, and will continue to weaken for the next 12–18 months, at the least, according to a Moody’s Investors Service client note on Tuesday.
“The credit quality of many developers has weakened in the past one to two years, and the unclear recovery prospects for contracted sales will add uncertainty for them to restore financial profiles commensurate with their rating levels in the next 12–18 months,” said the Moody’s note accessed by The Epoch Times.
It added that private developers will continue to come under pressure because of limited financial resources and constrained funding access.
In September 2023, Moody’s revised the outlook for China’s property sector to negative from stable, amid concerns over the slow economic recovery, weak property market prospects, and the project completion and delivery ability of developers.
The credit ratings agency said the benefit to housing demand from recent supportive policies will be short-lived and forecasted that nationwide contracted sales will decline over the next six to 12 months.
