Can Jack Ma avoid the rich-list curse?

Deng Xiaoping may have said to get rich is glorious, but in today’s China it can sometimes be more a curse than a blessing. Just ask Jack Ma.

Thanks to the largest stock offer in history, the founder of e-commerce giant Alibaba has once again shot to the top of the country’s rich list, with a fortune of $US25 billion ($A27.05bn).

But at the Clinton Global Initiative in New York today, Ma told Chelsea Clinton his happiest days were when he was making just $20 a month.

“When you have $1 million, you’re a lucky person,” he told Clinton.

“When you have $10 million, you’ve got trouble, a lot of headaches.”

It’s a common sentiment in China. In fact, it’s the norm for Chinese lottery winners to wear a disguise and alter their voices electronically when they collect their loot.

The winner of an RMB497m (A$91.55m) lottery prize in Shandong province last month was dressed as Mickey Mouse. Preceding him were Batman, Spiderman and the Transformers robots. 

But things get even more dangerous for those on the very top of the heap.

Of those listed in the latest Hurun rich list, released yesterday, two are in prison, two are awaiting sentencing, five are facing corruption investigations and three have simply disappeared.

Getting onto the Hurun rich list isn’t necessarily cause for celebration says Oliver Rui, professor of finance and accounting at the China Europe International Business School in Beijing.

“Political connections play an important role in the economy,” Rui told China Spectator.

“And some of these entrepreneurs get rich with the help of corrupt officials.”

Rui, along with academics Xianjie He, Xiao Tusheng and Michael Firth, has found that investors react negatively towards companies controlled by rich-listers.

According to the research, resentment towards those on the list has real knock-on effects on the value of the companies they run, with many losing significant value in the three years following a listing on Hurun.

The research also found that companies don’t only take a beating from investors. The government, heeding public pressure, also tends to scrutinise the rich-listers more closely. 

Ultimately, business people who get listed “are far more likely to be investigated, arrested and charged compared to other private entrepreneurs”, the authors conclude.

As Xi Jinping’s anti-corruption campaign continues to drag on, more and more business people and their political patrons have been caught in the hunt.

And consumption has become markedly less conspicuous in Xi’s China, with the nouveau riche increasingly admonished for vulgar displays of wealth (Vanity unfair for China’s wealthy show-offs, August 5, 2014).

As the campaign continues apace, an increasing amount of China’s wealthy are packing their bags and getting out of the country.   

According to Hurun, 64 per cent of the country’s millionaires have either emigrated or are planning to in the next few years. Their favourite destinations are the US, Canada and Australia.

But things may be changing. Rui’s research also shows that it’s the entrepreneurs involved in rent-seeking industries who tend to experience more negative consequences.

And as China transforms into a more consumer-led economy, the fortunes of real-estate and infrastructure tycoons are likely to lag, while those at the forefront of the rise of the consumer internet prosper.

Tellingly, this year’s top 10 includes not just Jack Ma but also Pony Ma of Tencent, Robin Li of Baidu, as well as the founders of Xiaomi and JD.com.

“The new economy is less regulated or influenced by the government,” Rui told China Spectator.

“Innovative entrepreneurs can get rich quickly with help from overseas capital markets.”

Perhaps that’s why, when compared with their western counterparts, Chinese people still have more trust in corporations.

According to a survey conducted by CNBC and PR company Burson-Marsteller, 84 per cent of Chinese people see corporations as a source of “hope” compared to just 36 per cent of Americans.

And not betraying that sense of hope will be key to China’s newly-minted billionaires holding onto their wealth and prolonging their success in business.

According to Rui and his colleagues, the best way to avoid falling foul of investors and the government is to engage in strategic philanthropy.

In April, Jack Ma followed the lead of Bill Gates and Warren Buffett to set up a philanthropic trust funded by share options that, after last Friday’s IPO, now amounts to around $3bn.

 “When you have more than $1bn dollars, or a $100m, that’s a responsibility you have, Jack Ma told Chelsea Clinton today.

“It’s the trust of people on you, because people believe you can spend money better than the others.”