China’s new mega-rich fear official state scrutiny

2011-09-10 19:57

Growing numbers of China’s rich want to avoid publicising their wealth, reflecting fears of official scrutiny amid a vast and growing rich-poor divide.

This after several billionaires have ended up in jail, according to Forbes magazine.

Rural incomes have been rising more slowly than urban incomes for two decades – a factor that could threaten social stability and the ruling Communist Party’s grip on power in a country where 150 million people still live on just $0.50 (about R4) a day.

More of the newly rich than in recent years asked to be left out of Forbes Asia’s latest China rich list, said Russell Flannery, a senior editor at the magazine who oversaw the compilation of the list released this week.

“I think it’s a reflection of a bit of a sea change in Chinese society right now,” said Flannery. “There’s a lot of concern in China about the wealth gap.”

Several former high-flying members of earlier rich lists have ended up in jail, including Huang Guangyu, the founder of Gome Electrical Appliance Holding Ltd (0493.HK), and Shanghai property tycoon Zhou Zhengyi.

CLSA Asia-Pacific Markets in a study released on Thursday estimated that China will account for 60% of the rise in high net-worth individuals’ wealth in Asia over the next five years.

The latest rich list pitted stolid industrial muscle against high-tech, with the head of an earth-moving company pipping the ­­co-founder of the nation’s biggest internet search engine for the top spot.

Liang Wengen, the chairperson of Sany Heavy Industry, came in at number one on the Forbes’ list, a day after the rival Hurun rich list also gave the top spot to the magnate, whose company makes earth-movers, pile drivers and concrete mixers powering the nation’s urban transformation.

Forbes estimated Liang’s wealth at $9.3 billion (about R66.3 billion).

“This is a remarkable story of people growing up dirt poor in Changsha in Hunan Province, and from one group of people, getting seven of them on the Forbes China rich list, including four billionaires,” said Flannery.

Along with Liang, three other entrepreneurs associated with Sany are on the rich list: Tang Xiuguo, Mao Zhongwu of Xiang Wenbo. Liang, Mao and Tang were all founders of the company.

Other members of the Forbes top-10 include Liu Yonghao, an agribusiness magnate, and several real estate investors.

Sany’s success partly reflects the rapid growth of China’s high value-added manufacturing sector over the past decade, with exports from makers of pricy machinery and construction equipment advancing faster than the makers of low-value goods like toys. Sany is based in Changsha, the capital of Hunan in southern China.

“We’ve seen a structural change in Chinese exports that started several years ago. If you look at the export compound yearly growth rate from 2003 to 2008, you can see that low value goods are not growing fast. High value goods are growing at between 40% and 50%,” said David Lee, a China-based partner with Boston Consulting Group, who specialises in industrial goods.

The company says it has more than 60 000 employees and recorded sales revenue of 50 billion yuan last year.

Despite the gritty image of earth-moving equipment, the company also says it channels at least 5% of that revenue into research and development and has production plants in the US, Germany, India and Brazil.

Forbes gave the second place to Robin Li, a founder of Baidu, China’s dominant internet search engine, who the magazine said had a personal wealth of about $9.2 billion (about R66 billion). Li could have snatched the top spot if it wasn’t for the volatility of share markets in the US, where Baidu is listed.

Forbes estimated that China’s crop of billionaires grew from 126 last year to the current number of 146.

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