How generational wealth transfer will reshape China’s economy

The largest wealth transfer in history will accelerate the tilt of economic influence to the East as investment priorities change and women – who are set to inherit a growing share of assets – gain financial clout. The implications will ripple across geopolitics, financial markets and fiscal policies. Financial research firm Cerulli predicts that globally, an estimated US$124 trillion is expected to change hands by 2048. The 2023 Hurun Wealth Report estimated that heirs in China will receive US$11.8 trillion over 30 years, a sum approaching China’s projected 2025 nominal GDP of US$19.5 trillion. Unprecedented demographic trends worldwide underpin this generational shift as people are living longer and birth rates are dropping. Those over 65 will form a greater share of the population, with China among the world’s fastest-ageing economies. Its 65-plus demographic could reach 30 per cent by 2050, double the current level. Much of the personal wealth in China was amassed by first-generation entrepreneurs. Family businesses and their founders have powered China’s rapid economic rise, compressing generations of growth into a single era, a trend seen throughout the Asia-Pacific. Private companies deliver 60 per cent of China’s GDP, with family-owned firms making up two-thirds of listings on the Shanghai and Shenzhen stock exchanges. How, and to whom, control is passed will steer China’s economic trajectory towards growth, decline or a middle path. A 2014 report noted that the richest 1 per cent of Chinese households controlled a third of the nation’s wealth. A 2023 study found that the personal wealth share going to the top 1 per cent exceeds the wealth going to the bottom 50 per cent by five times, though some researchers believe this concentration has peaked. After decades of high savings, the middle class has accumulated assets far exceeding their ancestors’ holdings. For these households, often highly leveraged with long-term mortgages, property is the dominant store of wealth, a consequence of capital controls and limited channels for overseas investment. Investors disregarded the concentration risks, liquidity constraints and frenzy of speculation. The real estate market collapse has slashed property values. Owners are often now left with mortgages they can’t escape and homes they can’t sell, problems their heirs will have to confront. These issues will complicate already difficult probate settlements. A large portion of inheritance will initially be intergenerational transfers, likely going to a spouse or siblings before being more broadly distributed to children, family members and others who are typically younger. Disputes among heirs are not uncommon. These conflicts, plus beneficiaries’ lack of preparedness for inherited wealth, are driving demand for wealth advisers and single-family offices (SFO), which are private companies that manage investments, address lifestyle needs and nurture future leaders of family-owned enterprises. As wealth passes to widows and female heirs in China, they will become more influential, exercising greater control over family assets, businesses and investment decisions. A WealthiHer Network study indicated that 98 per cent of women in mainland China felt the most important factors to consider when investing related to a company’s environmental practices and positive impact on communities. Their roles will be elevated in corporate governance, capital allocation and philanthropy, reshaping decision-making norms across China’s economy. According to a 2024 survey by accounting firm EY and Hong Kong University of Science and Technology, 42 per cent of SFO founders in Greater China originated from the mainland, while Hong Kong accounted for 51 per cent of SFO locations. Seventy-eight per cent of respondents to the survey expressed interest in setting up an SFO located on the mainland while 40 per cent chose Hong Kong as their top preferred location. Hong Kong’s mature financial ecosystem is its draw. In time, heirs in China will be increasingly younger with different ambitions from their predecessors, drawing on their unique experiences in education, culture, travel, social networks and technology. They came of age and pursued their own paths during more than four decades of rapid growth in China after the 1978 reforms. They experienced global integration, digital transformations and a series of equity bull runs. Confident in their abilities, they are likely to favour high-risk, high-reward investments. Given their education, tech investment experience and reliance on professional advice, they are comfortable with market volatility and are likely to diversify into new financial instruments, hedge funds and private markets. This diversification is likely to deepen market liquidity, accelerate financial innovation and gradually rebalance the centre of gravity of global finance away from traditional Western hubs. Geopolitics is also influencing these investment flows. The US dollar’s dominance will continue to erode gradually as trade settlement, reserves and investment use multiple currencies in another driver of financial influence shifting eastward. Beijing faces a balancing act. It must encourage risk capital without boosting destabilising speculation, broaden financial products and promote new markets while managing these innovations’ systemic risks. Regulations need to be continually reassessed to ensure clarity in succession rules and frameworks for trusts and other inheritance vehicles. Above all, investor protections and disclosure standards must be strong to safeguard public trust and confidence. These bolster competitiveness. China’s generational wealth transfer will not simply be a handover of assets. The trend will re-engineer capital markets, shape risk culture and forge financial power exerted by women and young heirs. The world’s next financial era will be shaped not only by technology or geopolitics, but by who inherits capital and how they choose to deploy it. China will be pivotal in that global transition.

How generational wealth transfer will reshape China’s economy

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}China’s generational wealth transfer will involve more than assets changing hands; it will reconfigure capital markets and global financial power

China’s generational wealth transfer will involve more than assets changing hands; it will reconfigure capital markets and global financial power