Let a 1,000 Millionaires Bloom in China, And U.S.

BEIJING -- China has the world's fifth largest number of households with more than $1 million in liquid assets, trailing only the U.S., Japan, Britain and Germany, said a report released by the Boston Consulting Group.

There were 310,000 Chinese millionaires at the end of 2006, up from only 124,000 in 2001, more than 48,000 of which have more than $5 million in liquid assets. Given China's continuous and rapid economic growth, the report also predicted the number of millionaires to double by 2011, reaching 609,000.

These households, which only account for 0.1% of the total number of households in China, possess 41.4% of the country's total wealth, said the report.

According to this WSJ report, America’s inequality peaked in 1929, when the top 1% controlled about 48% of the wealth.

We hear a lot of hand-wringing about income inequality in the U.S., but perhaps there are some lessons from China. When a country experiences significant, dynamic change from new technologies, innovation, globalization, opening of markets, increased competition, etc., income inequality increases because talented entrepreneurs are able to generate huge amounts of wealth at levels that are not possible in a static, insulated, uncompetitive environment. Some of the same dynamics that are creating more millionaires and more income inequality in China, are probably also creating the same outcomes in the U.S. Not to worry.

Bottom Line: Wouldn't most Chinese agree (and wouldn't you agree) that the average person in China today is better off today than 10, 20 or 40 years ago, even though income inequality has never been higher?