The 2010 Hurun Rich List (for info on the 2009 list see our post here) was announced earlier this month and shows both the fast upward mobility of China’s entrepreneurs and the speed with which they can fall. Over the past several years, the Hurun List has been an increasingly popular measuring stick for the analysis of China’s wealthy class and that includes their charitable activities. The Hurun report reflects a number of changes that will impact the social sector (both directly and indirectly). Below are several ideas brought out by the List:
The New, Young, Up and Coming Wealthy
The report found that on average Hurun listers are 15 years younger than their entrepreneurial counterparts in the West, and they’re multiplying more rapidly. Over the past year, known RMB billionaires (US $150 million) have increased from 363 to 1,363. Although they still make one-third less than their male peers, China has 11 of the top 20 richest women in the world.
Although Hurun’s entrepreneurs made their wealth mostly from the domestic market (95 percent domestic to 5 percent export), they were an ambitious set this past year and sought to expand through big investments outside of China. Listers sought to purchase Hummer and buy stock in Liverpool’s football team this year.
This year has been an exciting and scandalous one for China’s rich set and the Hurun List reflects the volatility. The increasing popularity of the Rich List means that for some it is a list to get on and for other it is one to stay off. While the Hurun folks have identified 189 US dollar billionaires (vs. RMB billionaires), they estimate that this is only a fraction of the 400-500 total that have yet to be verified. This is due, in large part, to the fact that many wealthy have acquired their money by somewhat nefarious means and/or are avoiding taxes.
The reality that several on the Rich List have been in the headlines for illegal activity reflects on China’s extremely rapid development and the fact that wealthy entrepreneurs are part of a very new upper class that grew faster than the system of checks and balances.
One of the headliners of the past year, Yu Pengnian, garnered two firsts: he was both the first billionaire philanthropist and the first person on the Hurun List to drop off of it altogether because he donated his entire sizable wealth to charity.
Both Yu Pengnian and fellow philanthropist Chen Guangbiao (with a not-too-shabby US $450 million) have challenged the wealthy with their culture-bending philanthropic goals (see here and here). These very public heavyweights could change the way the general public views the philanthropic responsibilities of the wealthy.
Additionally “glass king” Cao Dewang (who attended the Gates-Buffett dinner in China last month) has freed up half a million dollars worth of shares in his company to set up his own philanthropic foundation.
Rupert Hoogewerf, the creator of the Hurun list says, “There is a trend of the Hurun Rich List to turn their ‘new money’ into ‘old money’, to be seen to be making their wealth more discerning, more sophisticated. Being a good corporate citizen is seen as key to succeed in this.”
The report also shows that wealthy philanthropists give the most to education, disaster relief, and health care. And the most generous are concentrated in Guangdong and Fujian provinces.
Resources vs. Cash
Bad press and miserliness does nothing for the cause of the extremely wealthy who are often already distrusted by the public at large. However, many business tycoons disagree that giving to charities is the best option. They are often distrustful of nonprofits and opt to give through their own foundations or, like Chen Guangbiao, directly to people. Others have stated that they disagree with giving money at all and say that making their companies more socially responsible, such as creating more jobs, is worth more than any donation. Job creation and responsible business practices are important, of course, but they’re also much harder to track.
Jack Ma, co-founder of the hugely popular Taobao and Alibaba, is a weathervane for CSR in China. Ma recently spoke on Charlie Rose emphasizing the need for companies to create jobs and take care of the environment, “China philanthropy and charity I understand, but people like us should use resources better…I will regret when I am 80 years old giving the money away. I should spend the money now creating jobs.”
What does all this mean for philanthropy?
Accountability and transparency are increasingly demanded of the wealthy, as well as, an expectation that they give back to the community. The fact that 95 percent of their wealth has been generated domestically reinforces that expectation.
Yet it must be noted that China’s wealthy are still newly minted. Only one percent, according to the Hurun report, inherited their wealth, and they are not so far removed from the hardships of the past to have forgotten them altogether, as Collective Responsibility reminds us. Additionally, the nonprofit legal infrastructure has yet to catch up with this new wealth; therefore, making it difficult to donate large sums of money.
We expect to continue to see growth in the number of high net worth individuals in China and their corresponding contributions to civil society over the coming years. Overall, the Hurun List reinforces that there has never been a more interesting time to watch the growth of China’s philanthropic sector.