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Why do Chinese buyers have so much money?
By Juwai, 30 April 2014
Anyone in the Western world today over the age of 30 grew up thinking of China as a large but poor country.
So how is it that China suddenly has so much money to invest in international real estate?
To answer that, we have to travel back to the not so distant past. It is 1976 and Mao Zedong lays dying in bed. This charismatic man led the Communists to victory after more than 20 years of civil war, united the nation and began to earn back the respect from other nations that China for so many decades had lost.
Mao also sealed China from the world and launched the Great Leap Forward and the Cultural Revolution. These two campaigns stopped the country’s economy in its track, caused massive social upheaval and even led to tens of millions of deaths.
After Mao’s death, a man named Deng Xiaoping emerged as the dominant figure in China. He pushed economic reforms on a bigger scale than anything seen in any other country until the Soviet Block collapsed after the Berlin Wall fell in 1989.
While Mao’s most famous quote is probably "Political power grows out of the barrel of a gun”, Deng had very different priorities. He was a pragmatist and a man a Western economist could grow to love. One of Deng’s most famous lines is, "To be rich is glorious”.
The incredible wealth China has today began with these two men. Mao brought the country together and gave new backbone to its fragmented political structure, and Deng carried out the economic changes that would cause China’s economy to flourish and lift hundreds of millions of people out of extreme poverty. Not incidentally, he also inducted tens of millions of them into the class of billionaires, millionaires, and merely well off.
Here are some numbers that illustrate how quickly China has grown:
- China’s manufacturing base has grown 18-fold over the last 30 years – it creates US$2.2 trillion of value every year.
- There are already 63 million Chinese who are upper-middle-class or wealthier – by 2026, 200 million more people will enter the middle class.
- China has US$15 trillion in bank deposits, and is adding US$2 trillion more in savings each year.
- Education spending is up 100%, and there are seven times more college graduates each year today than in 1998.
- At 550 million, China has more internet users than any other country – this number could rise by 300 million in the years to come.
- 350 million Chinese have left poverty behind since 1990 – disposable income per capita soared 300%.
- China has US$3.5 trillion in foreign exchange reserves.
- China is the largest trading partner for some 40 countries – its annual trade surplus with the USA alone is more than US$300 billion.
- China today accounts for 13% of global research and development spending.
- Sales of property in other countries to buyers from China has grown from US$7.2 billion in 2009 to US$37 billion in 2013.
Hopefully, this little history lesson has given you a better understanding of China’s massive growth. With future growth rates predicted to hover around 7% or 8% per year, China’s massive economy will only become bigger. And, the number of Chinese looking to buy international property will also continue to grow.
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