Lamborghinis on the Sidewalk
My friends and I have developed a new metric to measure China’s economic growth and rising inequality – I call it the “Lamborghini on the sidewalk” index.
The metric is simple – how many times per week do I see a Lamborghini or some other exotic sports car double-parked on the sidewalk of my adopted hometown of Shanghai, blocking pedestrian traffic. The index is an indicator of two things – first, an indication of China’s wealth and ability to consume at the high end of the global economy, and second, an indicator of the willingness of those at the top to flaunt their wealth to the dismay and inconvenience of the average citizen.
China’s economy has famously grown at breakneck speed for 3 decades – a sustained annual growth in economic output of nearly 10% since 1979. In that time, enormous wealth has been created – 200 Million people lifted out of poverty, and a doubling of the income of the average Chinese citizen in only 10 years. While these numbers are astonishing, they mask the fact that the rewards of China’s growing economy have fallen disproportionately on the top.
According to a recent study by the Boston Consulting Group, there are now 1.1 million millionaire families in China, second only to the U.S. and Japan. The growth of China’s millionaires is the highest in the world, with 240,000 new millionaires created last year, a growth rate of 31% from 2010. The average citizen, in spite of the fact that they are also better off, can’t help to take notice that while they are better off, those unelected leaders at the top are much, much better off than they are. The means of wealth creation have also been suspect in many cases.
A 2006 study by several Chinese research institutions showed that almost 90% of the country’s top leaders in sectors encompassing finance, foreign trade, property development, construction, and stock trading were “princelings”, a term referring to the offspring of top government officials. The same study found that about 90% of China’s billionaires are the children of high-ranking officials. Compounding the sense of growing and unfair inequality is the sense that China’s well off don’t care about the less fortunate. The wealthy are much less likely to make charity donations or participate in civic causes in China relative to other countries.
The result is almost universal dislike of wealthy people. According to a recent survey released by the Zhejiang Academy of Social Sciences “96 percent of the public said they feel resentful toward the rich.” One wonders if there are any of the remaining 4% who aren’t rich themselves. It turns out the wealthy don’t seem to like the 96 percent either – in addition to flaunting traffic rules with their luxury cars, many of them are leaving or planning to leave. A survey published in November by the state-run Bank of China found that 60% of about 960,000 Chinese people with assets over 10 million yuan ($1.6 million) were either thinking about emigrating or taking steps to do so. Their motivations vary, but the top reasons mentioned in the study were their children’s education, followed by concerns over air quality, food safety and financial security. And many of the wealthy Chinese who remain in China have tried to set themselves apart from everyday society by living in ostentatious apartment developments – “Richgate” and “CEO Mansions” are some of the newer developments in Shaghai.
China faces the problem of how to make wealth creation a legitimate activity in the eyes of the public. One part of this will be to inspire a sense of civic duty in this new wealthy class who now have the opportunity to consume conspicuously. Another challenge will be to retain the creators of wealth through education, healthcare, clean environment and other civic goods that match what other first world countries have to offer. In the meantime, wealth inequality has become a growing destabilizing force in Chinese society. This most recently came to the forefront in the Chinese press coverage of the deposition of Chongqing governor Bo Xilai, and the resulting public furor over his vast personal wealth. Last week the “Lamborghini on the Sidewalk” index increased to two – a Bentley double parked on the sidewalk on Changshu road and a Porsche blocking traffic on Huaihai road. Time will tell how high of an index the Chinese people will tolerate.
Doug Raymond, the founder and CEO of Julu Mobile, is a Truman Security Fellow.