4 Reasons Behind the Volatility of China’s Billionaire List

Although the U.S. still boasts the highest total number of billionaires of any country, China is — not surprisingly — hot on its heels. According to Forbes magazine’s 2021 World’s Billionaires List, the number of billionaires in China rose by more than 60 percent between 2020 and 2021 (growing from 387 to 626), as compared to an increase of 18 percent (from 615 to 724) for the U.S. during the same time period.

In many ways, the growth in the number of Chinese billionaires parallels the astonishing growth of the Chinese economy generally: Per capita GDP in China grew from $951 to $12,000 between 2000 and 2021 and has ballooned by almost 50 percent in the past six years alone. Equally significant, the number of internet users grew from 8.9 million in 2000 to more than 900 million today — and mobile phone penetration among China’s 1.4 billion citizens is close to 100 percent.

But a closer look at China’s billionaire list reveals an interesting and somewhat idiosyncratic characteristic, particularly when compared to America’s list: Whereas America’s list has been largely stable for many years, especially at the very top, individuals on China’s list change frequently, with new names appearing seemingly out of nowhere, and familiar names shifting and disappearing at a surprising clip. 

Systematic Change

Why does China’s list show so much turnover? The answer has much to do with the country’s singular socialist market economy paradigm, which allows the Chinese government’s communist-oriented, top-down policies to firmly guide China’s powerful capitalist engine. Take a look at the four factors highlighted below for a better sense of what this looks like in practice.

1. Rapid changes in high-tech infrastructure and priorities

For the past decade, China’s central government has focused intensely on turning the country into a technology superpower. In 2020, the government announced the investment of some $1.4 trillion over five years in such key tech-related initiatives as next-generation wireless networks, AI, robotics, cloud computing and data analysis. (The new investment funds will also serve to complement the country’s massive “Made in China 2025” infrastructure and manufacturing initiative.) China’s government is openly working to free itself from reliance on American technology heavyweights such as IBM and Oracle; at the same time, the government’s policies will continue to enrich such leading Chinese tech companies as Huawei, China Telecom and China Mobile, as well as those companies’ numerous stakeholders and suppliers.

Indeed, Beijing’s swift and significant infrastructure upgrades often set the stage for the arrival of new generations of tech-enabled billionaires and the departure or decline of existing such groups. Not surprisingly, 2021’s list of Chinese billionaires is dominated by high-tech and green-tech (another target of big government bucks) entrepreneurs who have capitalized on the government’s investment in cutting-edge tech capabilities. Notably, for instance, this year the wealth of Zhang Yiming (the 38-year-old founder of mobile app powerhouse ByteDance) surpassed that of both Jack Ma (the 57-year-old founder of Alibaba) and Pony Ma (the 50-year-old founder of Tencent), formerly China’s richest men.  

2. Changes in Government Policy

Volatility in the Chinese billionaire list also reflects the ability of China’s central government to make broader policy changes. In sharp contrast to the democratic nations of the West — and in particular contrast to the gridlocked U.S. — China’s central government can make and execute new policies with remarkable efficiency. Ten years ago, for instance, China’s “rich list” was headlined by real estate tycoons and the leaders of related businesses such as home appliances. In 2016, however, the Chinese government announced a policy of “housing for living not speculation,” thereby dramatically reducing the profit-generating capacities of the real estate sector. The result has been an expeditious decline in the rank of real estate and related industry billionaires.

3. Emergence of Equity Financing

Such shifts in the government’s strategic priorities and policies have been accompanied by parallel technology-enabled shifts in the country’s financial prowess and capabilities. As China’s banking and financial systems have matured, along with its capital markets, young firms have made increasing use of equity financing. Much as occurred in the U.S.’ dot-com boom of the late 1990s, skyrocketing equity valuations, often driven by hyped initial public offerings, have turned equity holders into overnight billionaires. The downside, of course, is that falling equity valuations can lead to the rapid reversal of fortunes.

4. China’s Dynamic Balancing Act

The three factors listed above operate within the larger context of a China that is itself rapidly evolving. Western observers may often assume that this evolution entails China’s stop-and-start progression along the bumpy road toward Western-style capitalism. But this is a deeply flawed interpretation of what is happening in China. A more accurate understanding is that China is engaged in the process of continually rebalancing its socialist market economy: If things move too far in one direction or the other, the Chinese government will pull back, sometimes abruptly, with the aim of rebalancing its system. Indeed, the Chinese government’s keen interest in maintaining its socialist-market balance as it moves toward its strategic priorities is a primary driver of its policies and actions.

It should also be noted that the Chinese people have a long and impressive tradition of entrepreneurship and are far less risk-averse than Westerners tend to think. There’s no doubt that China’s booming economy, guided by its strong central government, offers openings for the full display of the Chinese people’s entrepreneurial and business skills. Of course, like so many other cultures, China has had its own struggles with overzealous “get-rich-quick” entrepreneurs who have engaged in unsavory and sometimes unlawful business practices.

Putting the pieces together

In many ways, the “churn” in China’s billionaires list isn’t surprising, nor should it be puzzling: You might think of it as the imprint left by the strong hand of China’s authoritarian government as it shapes and guides the country’s vibrant market economy.

There’s a larger point to be made. While Westerners may sometimes think of government intervention as antithetical to free competitive markets, the Chinese take the attitude that the government serves as a necessary agent of balance: If a company gets too big, the government may need to step in to encourage competition. When the Chinese government found in April 2021 that online retail platform Alibaba was engaging in anticompetitive practices, for instance, it slapped the company with a $2.8 billion fine. At the same time, the People’s Daily, the official newspaper of China’s Communist Party, published the party’s position: “Monopoly is the great enemy of the market economy. There is no contradiction between regulating under the law and supporting development. Rather, they complement each other and are mutually reinforcing.”

As we seek to better understand the growth and development of China’s economy (and its population of billionaires), it’s important that we bear in mind the country’s dualistic capitalist-socialist identity. If we can accept that China is both of these things at once, we’ll have a far easier time making sense of the country’s current and future actions and likely developmental trajectory.

This article was developed with the support of Darden’s Institute for Business in Society, at which Gabriela Matheu is a research associate.