A cool assessment of China's rise as Asia's second-strongest country in financial assets (2)

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Per capita wealth remains relatively low

Although the total wealth of the Chinese mainland ranks second in Asia, its ranking in per capita net assets languishes, and there is a substantial gap with the developed and emerging economies. Statistics indicate that the average wealth of an ordinary Chinese is 4720 euros, significantly below Malaysia at 7180, South Korea at 19180, and Taiwan at 65080 euros.

China's per capita financial holdings are stretched by its enormous population. Although China’s GDP is growing rapidly, the economic base remains weak. Urbanization has surpassed 50 percent, but future development will still be confronted by numerous challenges and the economy faces an uphill struggle.

The majority of financial assets are concentrated in the hands of a few people. The average financial assets of large numbers of poor people are worth very little. Says Xu Hongcai: “We need to direct our attention to the income distribution problem, make an effort to narrow the income gap, change the distribution mode of production, and improve the distribution of labor value.”

Worries behind asset growth

Another problem is that the growth of the mainland’s financial wealth relies on unsustainable credit growth.

In Asia financial assets are growing faster than the world average. However there is a negative aspect to this development—the growth of personal debt has surpassed the growth of assets. Michael Heise, a senior economist with Allianz Group warns that the credit-based asset growth is unsustainable.

Xu Hongcai notes: “Attention needs to be addressed to unfair income distribution. The government needs to provide sound guidance on secondary and tertiary distribution to achieve common prosperity. At the same time we should address industrial problems like low-end industrial structure, insufficient technological development, and lack of a systematic capacity to innovate.”

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