How China's rich spend their money

Rich Chinese mainland citizens spend about 3 percent of their personal wealth a year, with travel, daily luxuries, children's education and gifts as the top consumption items, a study on the consumer habits of millionaires shows.

With fortunes of 49 million yuan on average, the rich spent 1.45 million yuan a year, including 19 percent on travel, 15 percent on daily luxuries, 12 percent on children's education, and 10 percent on gifts, according to the Chinese Luxury Consumer White Paper 2011, published yesterday by the Hurun Research Institute and the Industrial Bank.

The findings came from a survey conducted between October and January among 878 mainlanders, 39 years old on average, with more than 6 million yuan worth of personal assets - the white paper's threshold for defining high net-worth individuals.

By the researchers' reckoning, there are 2.7 million such rich individuals living on China's mainland, including over 60,000 ultra-rich people, whose fortune exceeded 100 million yuan.

On average, the rich took 3.6 leisure trips in China and 2.4 such trips abroad last year. Business trips are more common than holidays within the ultra-high net worth group. More than 50 percent of them expected to spend more on travel in the future, and 60 percent wanted their private banks to give luxury travel advice, the survey indicates.

Hong Kong is now the undisputable destination for lavish spending by the rich, as 73 percent of them said it was their preferred location for purchase of luxury goods. The mainland accounted for only 28 percent of their luxury expenditures due to product and management issues. The purchases for the rich are concentrated in watches and jewels, while the ultra-rich group is showing increasing interest in super-luxury goods like yachts and private jets.

Some 29 percent of respondents expect their extravagant purchases to fall in the next three years while 40 percent expect fees for their children's education to rise.

Up to 85 percent of the high net-worth individuals said they have a plan for their children's overseas education while among the ultra-rich, the figure reached 90 percent. Two-thirds of the wealthy parents intend to send their kids abroad as early as high school or elementary school to foster their creativity and individuality.

The rich also strive for self-improvement. Almost half plan to take training programs over the next three years, and a third intend to go to lectures and conferences. Almost 30 percent have taken EMBA programs or classes for CEOs, and 75 percent of them found education to be the platform most helpful in extending their social networks.

The wealthy also threw a lot of money on gifts, which are required by China's social convention. It cost high net-worth individuals around 150,000 yuan each year to buy gifts, 80 percent of which are given at business gatherings. Most budget between 5,000 yuan and 20,000 yuan per gift. Watches are the first choice for men while wine tops the gift shopping list of the ultra-rich.