The Ultra-Wealthy Chinese Youth Redefine Their Perception of Luxury

China's growing wealth is a topic frequently discussed, often associated with a booming economy, a rapidly expanding middle class, and an increasing number of billionaires. According to the latest Global Wealth Report for 2023, China ranks second in terms of Ultra-High-Net-Worth Individuals (UHNWI), defined as those with assets exceeding $100 million, making up 10.5% of global millionaires, totaling 32 910 ultra-rich individuals by the end of 2023.

However, it's the rise of the new ultra-rich Chinese generation, also known as Fu er Dai (富二代: 富Fu = rich; 二代er Dai = second generation), that's garnering attention. "Compared to luxury consumers in Europe or the United States, the Chinese are much younger. In fact, 80% of Chinese luxury clientele are under 45 years old, whereas in the United States, consumers under 45 make up about 30% of the luxury clientele, and this proportion is even lower in Europe," explains Oscar Sand, CEO of L'Atelier Peony by OSCAR, an expert in luxury marketing and the Chinese market. According to a jointly published report by China Merchants Bank and Bain & Company on private wealth in China in 2021, 42% of High-Net-Worth Individuals (HNWI) with assets exceeding 10 million RMB, approximately $1.4 million, are under 40. China is home to 5.2 million "wealthy families" with assets of 6 million RMB, of which 2.11 million have assets of 10 million RMB, and 138 000 exceed 100 million RMB in wealth. According to the Hurun China Wealth Report 2022, these families will pass on 19 trillion RMB ($2.64 trillion) to the next generation over the next ten years. Currently, their total wealth stands at 164 trillion RMB, with 40%, or 67 trillion RMB, attributed to them.

The previous generation of ultra-rich Chinese often accumulated wealth through traditional businesses and manufacturing, but the new generation is different. The "Fu er Dai" are products of a globalized world, influenced by technology and digitalization, and they have grown up seeing China rise as a global economic powerhouse. Many have been educated abroad, in prestigious universities, and are often bilingual or trilingual, with a global perspective on business and culture. Their approach to wealth management, investment, and heritage preservation is distinct from that of their parents. According to Oscar, "The older generation is more interested in real estate and tangible assets, but the younger generation no longer sees real estate as the most reliable investment for wealth generation; they are turning to new means and technologies." Young, ambitious, and born in the digital age, these consumers represent a new era of wealth and prosperity.

In the face of unprecedented abundance and opportunities, what are the aspirations, preferences, and investment strategies of this new generation of wealthy Chinese?

They approach the concept of luxury in a way that goes beyond mere material possessions. Luxury is a multidimensional experience beyond five-star hotels and designer brands; it encompasses a superior quality of life, spiritual well-being, and positive social and environmental impact. Haonan, a student and investor in his spare time, shares," For me, wealth is not just material pleasure, but also self-recognition, self-satisfaction... and fulfilling my social responsibility." Wealth is perceived not only as financial capital but also as ''experiential capital.'' They often associate wealth with self-fulfillment and a balance between personal and professional life. Wilson, CEO of CBWells Group, explains, "Wealth is all the value in the world that I can absorb in my lifetime. Of course, I value material possessions, but I value experiences even more. I consider myself a person rich in experiences."

As for luxury, it has evolved to become a more inclusive and personal concept. Luxury can mean acquiring branded goods and unique experiences like luxury travel or private dinners with Michelin-starred chefs. It can also involve investments in contemporary art, enriching life experiences such as stays in exotic destinations, an appreciation for contemporary art, or pursuing sustainable investments. Haonan invests heavily in contemporary art and places great importance on travel and experience: "I take sabbatical years to explore life and enrich it with limitless possibilities. For example, I plan trips around the world to discover different lives and connect with myself. My passions are travel and staying in different hotels. When I do, I usually stay in a city for about two weeks to immerse myself in the culture, art, and cuisine. A positive approach to life brings me happiness."

While some gravitate towards a lived luxury, others preserve the collector's and material aspects while integrating the experience. "I am a big collector of wines and cigars," says Wilson. "I currently own more than 50,000 bottles of wine in my personal collection, some dating back to 1727!"

Ultimately, for some, luxury is closely tied to sustainability and ethics, reflecting their personal values. In an interview, Li (name changed to protect anonymity) emphasizes the importance of sustainability and legacy for the new generation: "In China, we are very attached to our descendants; people want to pass something on to their children. For my parents' generation, it was about real estate, money, or tangible assets. I don't think those are the most important things for my generation. Sometimes, I devote myself to something, and I like to think it will leave a legacy or have lasting value for our society." Luxury is thus redefined as a complex mix of personal choices, cultural experiences, and global responsibilities.

Chinese culture and family traditions undoubtedly influence the new generation of ultra-rich Chinese who perceive and interact with luxury. Historically, Chinese culture has valued frugality, family, and education as central aspects of life. However, with China's rapid economic ascent and increased exposure to global influences, these affluent young individuals are developing a hybrid perspective on luxury that incorporates both traditional values and modern aspirations. "Due to our culture, because we are a collective culture society, our social norms are of great importance and influence our consumer behavior significantly," adds Oscar. "That's why we used to pay much more attention to the value of things than self-expression or personal preferences in the past. But everything is evolving and changing. The younger generation includes more consumers who aspire to a certain form of well-being and attach more importance to experiences that align with their aspirations."

Influenced by a global education, the new generation has redefined luxury as a quest for self-fulfillment and social responsibility rather than mere ostentation. While deeply rooted in traditional Chinese culture and values, these "Fu er Dai" are products of rapid globalization, international education, and constant exposure to diverse cultural influences. This redefinition of luxury is a trend that offers opportunities for brands and businesses ready to understand and respond to these shifts. The impact of international education on this privileged youth promises to reveal even more unexpected facets of the profound changes occurring among the ultra-rich today.