RICH AND POOR IN ASIA (2024)

MORE MILLIONAIRES IN ASIA THAN NORTH AMERICA

In June 2012, Reuters reported fast-growing Asia for the first time had more millionaires than North America, according to a study by Capgemini and RBC Wealth Management's latest world wealth report. The report said the global personal wealth of people with $1 million and more to invest fell in 2011 for the second time in four years, reflecting the euro zone crisis and economic sluggishness in developed markets. But several emerging markets also felt pain, as the number of millionaires in India and Hong Kong fell by almost one-fifth. [Source: Joseph A. Giannone, Reuters, June 19, 2012]

Millionaire wealth in the United States and Canada in 2011 fell 2.3 percent to $11.4 trillion - still the wealthiest region by this measure - though it had 1.1 percent fewer millionaires, slipping by about 39,000 to a total of 3.35 million. Strong economic growth in China and other markets increased the ranks of millionaires across the Asia-Pacific region by 1.6 percent to a total of 3.37 million, as Asia vaulted past North America as home to the most millionaires. Even so, overall wealth in the Asia-Pacific region slipped 1.1 percent to $10.7 trillion, as key markets such as Hong Kong and India lost ground.

The world's population of millionaires grew by 0.8 percent to a record 11 million, according to the report, yet their collective wealth fell by 1.7 percent to $42 trillion. Every region except the Middle East saw declines in wealth. It was the first global drop in millionaire wealth since the 2008 financial crisis, when the ranks of the wealthy fell by 15 percent and their wealth contracted by 20 percent.

Sinking stocks, slowing exports and slumping currencies hit some countries especially hard. India saw its ranks of millionaires fall by 27,500, or 18 percent to 125,500 last year, reflecting a one-third decline in stock market values and a weakening rupee. Hong Kong's millionaire population fell by 17.4 percent as euro zone woes weighed on its own growth. Last year was the first time India's wealthy declined in population since 2008, when their ranks fell by 32 percent amid falling stock prices and lower global demand for goods and services, according to Capgemini.

China's population of those with at least $1 million to invest rose by 5.2 percent to 562,400 last year. Japan's millionaires increased by 4.8 percent. Last year was tough on investors, who were buffeted by a tsunami in Japan, a downgrade of U.S. sovereign debt, political unrest in the Middle East and North Africa, and waning confidence in governments struggling to stimulate growth. And weakness in developed markets slowed growth in export economies in Asia and Latin America. Singapore suffered from the euro zone crisis. The number of millionaires in Singapore dropped 7.3 percent, reflecting lower demand for exports.

Surprisingly, Europe increased its millionaire ranks by 1.1 percent last year, for a total of 3.2 million, while combined wealth fell 1.1 percent to $10.1 trillion. The report also said Europeans invest more of their wealth overseas, reducing their exposure to domestic markets.

The number wealthy people in Asia surpassed the number in Europe in 2011. Reuters report; “With a combined wealth of $10.7 trillion, Asia's wealthy have even eclipsed the $10.2 trillion held by Europe's generational millionaires...with an estimated 3.3 million high net worth individuals worth more than $1 million, according to Capgemini and Merrill Lynch's latest annual World Wealth report. [Source: James Pomfret and Lisa Yuriko Thomas, Reuters, December 18, 2011]

Super-Rich in Asia to Reach 2.67 Million by 2015

AFP reported in September 2012: “The number of super-rich in Asia is set to reach 2.67 million people by 2015, with a total net worth of an estimated $16.7 trillion, Swiss private bank Julius Baer said yesterday. The findings in the bank’s 2012 Wealth Report focusing on Asia, indicated that the region’s so-called High Net Worth Individuals (HNWIs) were largely immune from the economic ills affecting the rest of the world. [Source: AFP, September 26, 2012]

This was because of Asia’s economy, which continued to grow thanks to “domestic demand supported by robust job growth”, the bank said. Announcing the survey, which focuses on wealth creation in 10 of Asia’s biggest economies, Julius Baer also said its HNWI estimate for 2015 represented a compounded annual growth rate of 30 percent from 2010 estimates.

China could be home to 1.46 million super-rich by 2015 with assets of $9.3bn, the report showed. Indonesia was on course for a 25-percent compounded annual rise in HNWIs — the highest across Asia, thanks to its “flourishing domestic business environment”.

In India, wealth creation was driven by labour moving out of agriculture and by improvements in infrastructure, the report said, while China continued to see growth by redistributing its economic activity. The report, which also looked at how much it costs to live in luxury in Hong Kong, Shanghai, Singapore, and Mumbai, showed an 8.8 percent rise in prices since the last estimates.

Increased Buying Power of Asia’s Wealthy

Raju Gopalakrishnan of Reuters wrote: “Adrian Tan owns two Mercedes sedans and is looking to buy a third car. The 36-year-old financial trader was shopping with his wife on a Singapore street lined with luxury car dealerships and said he may stick with Mercedes or go for an Audi or a BMW. In Singapore, those cars don't come cheap, selling for upwards of $150,000 with taxes thrown in, but Tan said he was being relatively frugal. "The younger ones who have more disposable income and are doing so much better than before, their willingness to spend dwarfs me all the time. I have peers in their 20s buying high-end Porsches, Lamborghinis and so on." [Source: Raju Gopalakrishnan. Reuters, August 17, 2011]

Demand is booming in Asia for luxury cars, upmarket properties, art and jewelry, driven by a seismic shift in wealth from West to East. With more wealthy Asians than ever before, sales of luxury goods, properties and cars are soaring. In Singapore, just one BMW dealership in the city sells around 350 cars a month. In Greater China, which includes Hong Kong, Macau and Taiwan, BMW said it sold a total of 130,659 cars in the first six months of the year, up 60 percent from a year earlier. Christie's, the auction house, says Asian sales of art, fine wine, jewelry and porcelain in the first half of 2011 were 68 percent above the previous year at $515 million. "There is 13-14 trillion dollars spend in the region, one quarter of the world's wealth," said Porush Singh, senior vice president at MasterCard Worldwide. "The global financial balance is shifting toward Asia."

Mark Matthews, Asia head of research at the private bank Julius Baer. "Asia is very wealthy, but the wealth has not been (fully) institutionalized. It is first generation wealth, it is largely uninvested." As a result of that uninvested wealth, banks and money managers are beating a path to the doors of Asia's wealthy to enroll them as clients and help them put their money to work.

The first port of call for many newly rich Asians is property. Tales abound of Singaporeans going to Australia for a holiday and coming back as apartment owners after spotting a bargain. The city-state has the highest concentration of millionaire households in the world, with 15.5 percent having more than $1 million in assets under management. In recent months London property has emerged as a favorite choice of wealthy Asians because of the weak pound and sky-high real estate prices in their own countries.

Consumption and investment by Asia's wealthy are being boosted both by low interest rates and high inflation. "If you stay to cash, you lose purchasing power," said Dominic Schnider, head of Asia-Pacific macroeconomics at UBS. "So you either consume it or invest. Staying with it you lose. So that is why you are seeing, or you have seen, investors gearing up their exposure toward more risky assets to try to avoid loss in purchasing power."

Beyond investment, the outward trappings of wealth in Asia are also shifting. Earlier generations saved cash. Now, Singapore's wealthy can be defined by the property they own. In China, legions of newly rich are characterized by flashy, big-ticket spending. "Conspicuous consumption is very much a part of this culture of mass affluence in China, which is now coming into India, but is still much less," said Jahanzeb Naseer, product manager for Credit Suisse's equity research in Asia. "In India, the ultra-rich (the multi-millionaires) are doing that, but in China, even people below the millionaire category are doing that. That's affected obviously retail sales and jewelry and all that. In Indonesia, anecdotal evidence shows that it is somewhere between India and China in terms of luxury goods spending."

Singh at MasterCard said wealthy Asians in 14 countries spent more than $1 trillion in discretionary consumption last year, on dining out, travel, luxury goods, vehicles and communications. Urban China accounted for about $255 billion, or about one-quarter of that spending. This will rise to $1.8 trillion by 2015, with spending by China's urban wealthy rising more than 20 percent per year to more than $640 billion, MasterCard says. Extravagance is apparently no longer the taboo it used to be in Asia. "It used to be that when you're working, you wouldn't want to drive a flashy car because you'll be afraid of putting people off," said Tan, the Singaporean trader. "But now it's different. It's a flash game."

Diamond Sellers See Bright Future as Asia Wealth Grows

Sara Gay Forden wrote in the New York Time: Atsuko Tamura said she hoped her husband would splurge on a ¥1.3 million flower-shaped "co*cktail Fizz" diamond ring from De Beers for their 15th wedding anniversary. She already has a Tiffany necklace. "The diamonds are just sprinkled all over," Tamura said of the $11,000 ring as she stepped out of the De Beers shop in Ginza, one of Tokyo's busiest and most glamorous shopping neighborhoods. "De Beers is the most genuine of all." [Source: Sara Gay Forden, New York Time, January 2, 2006]

Competition is intensifying in the $70 billion diamond jewelry market as rising wealth in Asia increases demand for higher-priced pieces. De Beers, the world's largest diamond supplier, is winning customers from companies like Tiffany and Cartier, four years after creating a retail venture with LVMH Moët Hennessy Louis Vuitton. Sotheby's has also entered the fray, having begun selling its own line of jewelry last month.

"Size is an advantage in this business, as is brand recognition," said Scilla Huang Sun, who manages a luxury goods fund for Clariden Bank in Zurich. Demand will grow fastest in emerging markets like China and India as more people achieve incomes that let them splurge on diamond jewelry, Platt said. That trend will help companies like De Beers and Tiffany because newly wealthy consumers often seek out well-known brands to show off their wealth, according to Jacques-Franck Dossin, a London-based luxury goods analyst at Goldman Sachs.

Bernard Fornas, chief executive of Cartier, the world's largest jeweler, said, "There is a lot of cash out there, especially in emerging countries such as Russia and China." He added, "When people have already bought their private plane, their boat and their country cottage, they go for high-ticket jewelry."

Asia’s Poor

In the mid-1970s, six out of ten household in East Asia lived in poverty. By the mid-1990s that figure had been reduced by half.

Despite strong economic growth over the past few decades Asia remains home to more poor than any other region (in part because it has a lot more people — period — than any other region). As of 2005 Asia and the Pacific contained two-thirds of the world's 700 million poorest people and China was home to two thirds if Asia’s poor. The number of people living on $2 a day or less in East Asia is estimated to have fallen to 631 million — or 8 percent — in 2004.

Nick Cumming-Bruce wrote in the New York Times: Asia's poor are being neglected, a 2005 United Nations report says, because the dynamism and success of countries like China and India, which boast the world's highest rates of economic growth, are obscuring the problems of the 14 Asia and Pacific countries that rank among the poorest of the world's poor. Asia and the Pacific receives less than half of the aid that goes to the world's poorest nations, the report says. "The world's attention needs to be refocused on them" to counter their growing marginalization in the global development debate, it says. [Source: Nick Cumming-Bruce, New York Times, July 5, 2005]

"Africa deserves all the attention it can get, but Asia, with the bulk of the world's poor, also deserves the attention it needs," said Minh Pham, head of the UN Development Program's regional office for Asia and the Pacific, which produced the report. "We are a generation that could wipe out poverty. It's not a question of money: It's a question of political will," Pham said. Neglect of Asia's needs, however, could result in "widening inequalities and growing disaffection, which could lead to conflicts within and outside the region," the report warns.

"Asia has a track record of pulling itself out of poverty," said Pham, citing Singapore's rise to developed-country status in little more than a generation. "We are not asking for assistance in the long term; we are asking for a little push to lift these countries to the next rung of the ladder."The Asia-Pacific region's 14 least developed nations, ranging from Afghanistan and Bangladesh to tiny Pacific islands like Tuvalu, live on less than a quarter the average income of the rest of the region and they are chronically short of the savings and investment needed to finance their development.

Aid to these countries has grown in recent years but at a much slower rate than aid to the world's other poorest nations and the grant component in that aid has fallen. Moreover, many of the region's poorest countries identify infrastructure as a crucial component of their battle to reduce poverty. Yet overseas development assistance for this sector has fallen sharply in recent years. The granting of "quota-free" and "duty-free" schemes for all dutiable goods originating from least developed countries "would contribute enormously to raising export earnings and make trade work for development," the report says.

Poor Asia-Pacific countries are also in effect being penalized for their success in pursuing prudent policies that have helped to keep their foreign debts and the costs of servicing them lower than those of other poor nations. None of the region's poor countries is eligible for relief under the Heavily Indebted Poor Countries initiative. Yet they will need "significant" debt cancellation if they are to achieve their Millennium Development Goals for halving poverty by 2015, the report says.

Apart from financial aid, Asia's poor countries need to be given the opportunity to trade their way out of poverty, the report says. Countries like Bangladesh, Cambodia and Nepal are highly dependent on exports of garments yet duties on clothing exports imposed by the United States, their biggest export market, were triple the bilateral aid they received.Least developed Asian-Pacific countries are also economically vulnerable as a result of their tiny populations or isolation. The only one of the 14 to reach the point of graduating from least developed country status was the Maldives, largely on the back of tourism, said Pham, "and, boom, the tsunami wiped it out."

Widening Rich-Poor Gap in Asia

The high growth rates in Asia had been accompanied by the expansion of the gap between the rich and poor and this threatens to undermine stability. According to the Asian Development Bank (ADB) about 240 million people could have been lifted out of poverty in the 1990s and 200s if income inequality remained stable rather than increasing.ADB chief economist Changyong Rhee said, “Inequality leads to a vicious circle. With unequal opportunities creating income disparities, that in turn lead to dramatic differences in future opportunities from families.” [Source: AP, April 2012]

AFP reported: “The widening gap between the rich and poor in Asia's booming economies like India and China is leaving many mothers and children behind and putting youngsters' lives at risk, the UN said Tuesday. UNICEF, the United Nations children's agency, said that more than 40 percent of the world's children who died before their fifth birthdays in 2006 lived in the Asia Pacific region, and that great improvements were needed. [Source: AFP, August 6, 2008]

"The divide between rich and poor is rising at a troubling rate within subregions of Asia Pacific, leaving vast numbers of mothers and children at risk," the State of Asia Pacific's Children 2008 report said. Some 2.1 million under-fives died in India in 2006, and the report said the fast-growing economy must improve its health care, nutrition, education, gender equality and child protection across the board.

South Asia was lagging on public spending, with only 1.1 percent of gross domestic product allocated to health care. The boom in private sector health care for the region's expanding middle classes was battering public health facilities, the report added, tempting qualified staff to better paid jobs in private clinics or overseas. With half of the world's kids living in the Asia Pacific, the report said that extending health services to the poorest people was key to achieving the 2015 global goal of reducing under-five mortality by two-thirds of 1990 levels. "However the region's robust economic growth, the fastest in the world since 1990, has lifted millions out of poverty," UNICEF said in a statement.

Within the region, Southeast Asia made the largest strides in combating child deaths, with mortality for under-fives now half what it was in 1990. In China, UNICEF said child mortality had dropped between 1970 and 1990, but added the decrease had since slowed and that the country needed to take big strides to regain early progress. "China's overall disease profile now resembles that of an industrialized country, but inequities in access to quality health care and huge disparities in health outcomes remain prevalent and entrenched," it added.

The Asia Pacific as a whole has seen a 34 percent reduction in the under-fives mortality rate since 1990. Out of every 1,000 births in the region in 2006, 59 infants died before their fifth birthday. The 2015 target is 30 deaths per 1,000 births. Pneumonia, diarrhea and malnutrition are the main killers, the report said. "But the vast inequalities in income, geography, gender and ethnicity are essentially what stand in the way of children surviving and thriving," it added.

Image Sources: Wikimedia Commons

Text Sources: New York Times, Washington Post, Los Angeles Times, Times of London, The Guardian, National Geographic, The New Yorker, Time, Newsweek, Reuters, AP, AFP, Wall Street Journal, The Atlantic Monthly, The Economist, Global Viewpoint (Christian Science Monitor), Foreign Policy, Wikipedia, BBC, CNN, NBC News, Fox News and various books and other publications.

Last updated November 2012